Using credit cards sensibly- sponsored post

Credit card companies are often made out to be the evil bogey men but it's not always the case and as ever a little bit of common sense should be applied before writing off owning one entirely. For example, did you know it's difficult to build up a good credit history, which makes getting loans, mortgages and so on easier, without actually owning a credit card? Bonkers but true. It's recently come to light that some bank overdraft rates have an effective APR of around 800,000%, which makes paying 10-30% on a credit card look almost reasonable.

Anyway, there are a few tips I would give to anyone who is considering getting a credit card, most of which will be perfectly adequate for those people that already have one too:

• know what you should use a credit card for: fraud protection, insurance, taking overseas with you, building a good credit history;
• know what you shouldn't use a credit card for: spending money you don't have, withdrawing cash, making up persistent shortfalls in income (see my budgeting post on getting to grips with this);
• shop around for a good long term rate. Although introductory offers are good, often zero percent for 12-24 months, with a transfer fee, transferring balances all the time means consistent hits on your credit reference. Whilst this is not bad in itself, lenders can see how often your rating is checked, and the frequency can effect their decision;
• pay off more than the minimum if you can't afford to pay off the balance. Nowadays the minimum on any sizable balance will be 75%+ interest anyway, so you wont really be paying off anything.
• If you're disciplined, consider an introductory offer as an alternative to a finance arrangement for purchasing goods. For example, a TV over 24 "easy instalments" from a catalogue or a store is going to cost you a lot more in terms of finance costs than it would if you paid it off in 24 equal instalments on a low interest credit card.

But the most important point of all, and its so important it's not a bullet point, is to treat your credit card with respect and consider it negative money. Every pound you have on it is a pound you don't have because you owe it to a bank.

Disclosure: the tips and such are all my own, I was however paid for this post by a web comparison site. The subject is close to my heart though, I have had credit card problems myself in the past and learnt the hard way. Don't make the same mistake as me.