Welcome to Wallet Doctor: the UK's dedicated banking, debt and financial community. Use this site to help give first aid to your finances!
Understanding Credit Cards

Credit Cards : Friend or Foe?

The convenience, safety and simplicity of using a credit card has made them a staple weapon in the modern spending armoury.

The benefits are hard to resist but you still need to ask yourself.......Do I really need one?

This is a personal decision that should ultimately depend on how you plan to use the card but the following points should assist in making the right decision for you.

Advantages

  • Credit cards are extremely widely accepted these days by all sorts of businesses in all different locations of the world. If you lose your card you can simply get a replacement without suffering any loss of funds which makes it a preferable option to carrying cash in most situations.
  • Many cards have grace periods that last as long as 30 days which essentially means that you are given an interest free loan for a month before you have to pay off your charges. Money in your bank account will therefore be allowed additional days to earn interest until it is used to pay off your bill. This approach is however only successful if you pay your balance fully each month.
  • Credit cards are extremely useful during emergencies, especially when you need quick cash on the spot.
  • Regular monthly statements allow you to see how you are spending your funds and can thus be a useful aid to budgeting and controlling your expenditure.
Disadvantages
  • Credit Cards provide a large amount of easily accessible funds and this tends to give the user the illusion of being much better off and thus more inclined to spend beyond their needs and all too often their means. By the time the reality of the situation has caught up the debts may have mounted up.
  • Credit cards in general have high interest rates and annual fees and failure to pay off the balance in full by the end of each month will result in the addition of this interest and charges. Late or missed payments will also incur large fees and damage your credit rating.
  • Having multiple cards can also be a problem both to keep track of your spending and when you require additional credit. When you apply for credit for a bigger purchase such as a car or mortgage, creditors may be concerned that you are overextended and deny your application.
 
[ Back ]

Debt Management Plans

A Debt Management Plan is an informal process of negotiating with your creditors to:

  • Freeze interest
  • Negotiate payment terms
  • Provide peace of mind that you are taking action against your debts

 

Bankruptcy

Bankruptcy was traditionally seen as the ultimate financial humiliation for people with debt problems. but more recently people declare themselves bankrupt for much smaller sums of money. In fact, since 1997 when labour came into power there has been a 100% increase in bankruptcy. Bankruptcy

 

IVA's

The offical debt repayment plan. Reduce your debt by upto 70% , freeze the interest and get legal protection from the companies you owe. IVA's

Trust Deeds

Trust Deeds are dealt with more privately unlike a bankruptcy which is formally published. All interest and charges will stop and after 3 years you are debt free!  Trust Deeds