Credit cards: Best way to manage yours and avoid debt according to an expert

Credit cards allow people to pay for goods and services on the promise to the credit card company that this will be repaid at the end of the month. It is important to note, however, that interest and fees can also be incurred through the use of credit cards. This option can allow Britons to have a safe and flexible way to pay, and often helps with spreading the cost of purchases over time. 

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Multiple credit cards are often perceived as a way of boosting credit score, or saving money on interest charges.

But some point out high interest payments and fees can often prove to be significant drawbacks.

Express.co.uk spoke to Chris Lilly, Lead Publisher and expert in credit at personal finance website Finder.com to discuss the options, and why some opt for multiple credit cards.

He said: “Yes, it can be advantageous to have multiple credit cards. 

“Different cards have different benefits – one might help you spread the cost of a large purchase without paying interest, while another might save you fees on spending abroad.

“Some cards offer rewards when you spend with particular brands, so ultimately different transactions might suit different cards.

“Having multiple cards can also help increase your ‘credit utilisation ratio’ – that’s the amount of credit available to you compared to how much of it you’re actually using, and that’s a factor lenders can use when considering the risk of lending to you.”

Mr Lilly also explained that the emergence of open banking allows many Britons to be able to see accounts held with different banks in one place through apps.

However, he also warned Britons to take care if choosing to manage their finances in this way.

He added: “If you feel you might slip into unmanageable debt by having more lines of credit available, then the risks likely outweigh the benefits.

“Bear in mind that multiple applications for credit in a short space of time could hurt your credit score, or could be interpreted by lenders as a sign that you’re experiencing financial difficulties. 

“If you’re planning to apply for a mortgage in the next few months, don’t rush out and apply for three credit cards today!”

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For those who are looking to effectively manage debt, while multiple credit cards may help in this goal, there is an important method to consider.

Mr Lilly concluded: “You should always aim to pay off your most expensive debts first, and you should make sure you’re getting the best rates available to you.

“There’s plenty of free advice available to consumers – the Money Advice Service is a great place to start.”

The Money Advice Service Mr Lilly makes reference to, is backed by the government and provides Britons with important financial advice.

The service states organising debt payment into the categories of priority, non-priority and emergency can help Britons decide which to repay first.

For those in more challenging financial circumstances, Debt Management Plans or Debt Relief Orders may be more suitable. 

Debts can also be written off for those finding it difficult in exceptional circumstances. 

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