Making Cents: Stay in control to get the best out of your credit card

The payment of credit card bills will have been a financial priority in many Irish households in the last couple of weeks, as people got paid and turned their attention to clearing Christmas debt.

Making Cents: Stay in control to get the best out of your credit card

The payment of credit card bills will have been a financial priority in many Irish households in the last couple of weeks, as people got paid and turned their attention to clearing Christmas debt.

So this is a good time to highlight the findings of a recent survey by the Irish League of Credit Unions (ILCU) which suggests many Irish credit card users are unaware of the interest rate they pay or how it is applied.

Credit cards can be very useful but this is a worrying statistic. More than half the population (58%) own a credit card, so that is an awful lot of people using a financial product without understanding it fully.

36% of credit card holders incorrectly thought they “don’t pay any interest” if they cover the minimum balance due at the end of each month and of those that claimed to know what interest they pay, over half believed they pay less than 10%. In reality, credit card interest in the Irish market typically ranges from 13% to 23%.

“Since our survey last year, there has been a notable lack of improvement in consumer awareness around credit card interest and how that interest is applied,” ILCU Head of Communications, Paul Bailey said.

With a significant number of people in the country still using credit cards to fund ad hoc items, it is concerning that lack of knowledge on interest rates remains very much widespread.

To get the best use from your credit card, and stay in control of the debt, you need to know both the interest you pay and how the card operates. Each month, your credit card provider will send you a statement, either electronically or by post.

This will show how much you spent since the last statement, any cash you withdrew using your card, any interest due, the total balance (amount you owe) and the minimum payment that must be made by a set date, called the due date.

Clearing only the minimum payment means you will start to pay interest on the rest of the balance from the due date — the interest you pay will also be on the statement.

So making only the minimum payment on a regular basis means you are setting yourself up for increasing debt. It will cost you a lot in interest and it could end up taking years to pay off a large balance.

Ideally you should pay off all each month as it falls due, thus avoiding interest payments. You can set up a direct debit each month for a certain percentage of the bill, or a certain amount every month so that you are not tempted to only pay the minimum balance.

An important thing to mention is that taking out cash from your credit card is an incredibly expensive way to manage your spending. Most credit card providers start charging interest on cash withdrawals from the time the money is taken out, so there is no interest-free period, as there is with purchases.

Cash withdrawals are also frequently charged a higher rate of interest and should be avoided except in a genuine emergency.

If you want to learn more about how credit cards are best managed, Mr Bailey recommends www.ccpc.ie.

“An excellent resource for consumers to understand how credit cards work is the Competition and Consumer Protection Commission website, which provides simple explanations on financial products,” he said.

At the credit union, we provide an open environment where financial advice, guidance and support is available to anybody with these types of queries.

If you have an accumulated balance and do not see yourself being able to clear it in the short term, you need to address the situation. Consider converting the debt to a personal loan with a credit union or bank, which will have a lower rate of interest and a clear repayment schedule. You can get more information on managing credit card debt from the CCPC.

If you are struggling with debt you can also contact the Money Advice and Budgeting Service. The MABS helpline 0761 07 2000 can be contacted Monday to Friday, 9am to 8pm.

€84m grant support towards 24,742 home energy upgrades

The Sustainable Energy Authority of Ireland (SEAI) is encouraging householders interested in availing of Government supports in 2020 to visit www.seai.ie.

The authority’s annual report details the work it funded in 2019, including €84m grant support towards 24,742 home energy upgrades. These included 3,482 homes of people at risk of energy poverty upgraded free of charge, 112 deep energy retrofits, and 1,827 solar PV systems.

A further 661 homes and 474 community and commercial facilities were upgraded with €20.5m support to 57 community energy projects. These upgrades are beneficial for both the environment and the individual households.

The SEAI continues to provide grants for home improvement projects in 2020. Grants are available to upgrade or install insulation, heating controls or heating pump systems with other grants aimed at helping homes harness solar energy.

- Get full details of what is available and how to apply at SEAI.ie.

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