However there are small number of instances when debts are cheaper then your savings, or they cost so much to pay off that there is no point

Case 1: Interest free - For those who manage their debt properly by switching debt to interest free accounts should follow the opposite logic. The best way to explain this is for example, if the interest rate on your debt is less then the amount that your savings earn after tax, you can benefit from building your savings and keeping your debts. This will result in you making a profit on money borrowed to you by the banks.
Case 2: Penalties - If paying off your debt incurs a penalty, similar to many loans and mortgages then it is best to leave the cash in a savings account until the penalty amount is small enough that it does not matter.
Case 3: Emergency reasons - For anyone without debt an emergency cash fund is an easy and responsible thing to do. On the other hand, for those with outstanding debt, particularly on credit cards, it does not make much sense. When you are in deep credit card debt the best thing to do is use your savings, including any emergency funds you may have saved up.

You may not want to cut up your credit cards just yet, it is a good idea to keep them around incase of a true emergency such as necessary car or home repairs, and only use your cards if you have no other means of paying for it.

To avoid accruing these charges in the first place here are three simple steps to follow:
1. Know your minimum payment. Each credit card has a minimum payment which is in most cases based on a percentage of your overall balance on that card. Make sure you Keep track of your minimum payment for each card.

2. Set up an automated payment system - Set up a Direct Debit to pay off your card each month. This will allow you to be on time for your monthly payments. However, do keep in mind that paying only the minimum each month will take a considerable amount of time to pay off. For this reason whenever it is possible you should continue to mail in monthly payments, this will double your monthly payments lowering your debt that much more each year.

3. Don’t go over your credit limit.
It may be that your debts are simply from overspending. There are a number of ways to tackle this, shift to better value products. If you are getting credit card fines, this is a good way to deal with them.

Step 1: Before you begin the budgeting process, you should gather all your credit card and bank statements, bills, pay slips, invoices, etc.

Step 2: Group expenses into categories such as Home, Car, insurance, Travel, Entertainment, etc

Step 3: Use an excel file with two columns: Category and Monthly Expense.

Step 4: Based on your statements calculate your monthly expenses for each category and sum them up.

Now that you know how much you are currently spending money on, it is now time to look at how much is the right amount on each category to spend. This will allow you to keep your finances in control and put a little extra in your savings.

If you currently spend more than you earn, you will eventually have to dig into your savings, ending in you having to borrow resulting in more debt. Your health and mental stability will suffer as well, being in debt effects more then your pocket.

Now, before any purchases, ask yourself if you can afford it. The most vital thing is to understand that your finances lead your lifestyle, not your lifestyle leading your finances. One big problem many people do is search for the cheapest price on something they are looking for instead of looking to see if they can afford even that.

One of the problems with APR is that It only includes compulsory charges. When getting a new loan many lenders will include payment protection insurance without informing you. This insurance is voluntary and is not included in the APR.
In addition, The APR is intended to specify the amount you will pay each year over the entire term of the debt. In spite of that when the rates change it can become extremely difficult to understand.

The AER or Annual Equivalent Rate is the official rate for savings accounts, and is intended to permit easy comparisons as it is destined to level out the difference between accounts.

It is important to understand the concept of Compound interest when speaking about savings. Compound interest is the process of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. To put it simpler your money will build faster because you will earn interest on your original deposit but eventually you will also be earning interest on the interest the bank has already paid you. The longer you save the greater effect the compound interest will have on your savings.

If the interest is rewarded yearly then the Gross rate and AER should be the same, as there is no ‘interest compounding’.

Payment Protection Insurance
Payment Protection Insurance also known as PPI, is an insurance offered through the lender that will cover your repayments in case you are injured and can not work to make payment on the loan, this insurance is generally only 12 months. Before taking the Payment Protection Plan from the lender check your benefits from work and any other insurance policies you may have to see if they will cover any repayments if you are unable to. Many lenders offer this coverage however, it can be extremely spending and only add to the total you will have to repay.

1. Get on the electoral roll: If you are not on the roll, it is doubtful you will get any credit. For those who are not qualified to vote, primarily foreign nationals, send all the credit reference agencies proof of residency and ask them to add a note to verify this.
2. Building a good credit history and repairing past problems: Credit scoring attempts to foretell your behavior. If you have no credit history, it is even more difficult for lenders to do this, so you are more likely to be declined. Therefore building a history is the best method.
3. Keep payments current and never be late: Always try to pay at least the minimum on your financial products. Even if you are finding it hard to make ends meet, do not evade or miss payments. Doing this once or twice will cause problems that can cost you for years.
4. Time applications correctly: Credit applications leave notes on your file when you apply for numerous loans in a time, it hurts your score. Space out applications, not just for credit but also for car insurance, mobile phones and others.

What Do the Banks Know About You?

There are three main sources of information used for scores.

1. Your application form is how lenders get their vital information such as how much you make, your family size, even if you own your own home. It is critical that you fill in this information correctly, it can determine if the lender will even look any farther into you credit history and can determine if you receive the loan or not.

2. Your history with the company plays an important part of the decision process as well. They can look at your pervious and current accounts to see how well you have managed them to determine your likely hood of paying your debt in a timely manner.

3. Credit reference agency Experian, Equifax and Callcredit collect information, permitting them to send records on any person to potential lenders. All lenders use at least one agency when reviewing your file. This data comes from three sources…
• Electoral roll information. This is openly available and includes addresses and who lives with who information.
• Court Records. County Court Judgments (CCJs) and Bankruptcies indicate if you have a history of debt problems.
• Financial Data. Banks, building societies and other financial organizations assemble details of all your payments and transactions

What the Banks Do Not Know About You?

The following things are not on your credit report:
• Fines: Any fines you have acquired, such as parking or driving fines. Although they are issued by the courts, they are not ‘credit’ issues so they are not listed.
• Savings Accounts: As savings are not a credit issue, they do not appear on credit files.
• Medical History: Medical problems you may have had in the past are not published.
• Criminal Record: No criminal convictions are listed.
• Child Support Agency: Information from the Child Support Agency is barred.
• Information on relatives: Given that you do not have any joint financial products, there is no information about members of your family who live, or have lived, with you or any other third parties.
• Student Loans: This information is not supplied to credit reference agencies. The only exclusion is if you have a County Court Judgment against you for lack of payment, then that can be included.
• Debts more then six years old: The time span of credit files is more often than not six years, so if something happened more than six years ago it will not be on your file.

Moving your Debts from One Card to Another
Before transferring your debt from a high interest rate card to a lower one call your current card provider and ask them these three questions:
• Can you move debts from other cards to theirs? If so, what is their interest rate?
• What is your current outstanding debt?
• What is your current credit limit? If the balance transfer rate is good, ask to increase it.
Once you have acquired all this information from all of your credit lenders, it is imperative to take inventory and note down all your debts in one list. Make certain you have included any overdrafts as well; it could be more expensive than your credit card debt.

Now Move the Debt to Where It Is Cheaper
The goal is to take advantage of the new and existing customer balance transfer offers. If you cannot find or obtain a card with low special rates, transfer the money to cards with the cheapest average rate.

Focus on Repaying your Most Expensive Debts First
Once you get your balance transfers complete pay the most expensive card off first. When making your monthly payments pay the minimum on the others and pay as much extra as you can on the most expensive one. Once this one is paid off work on the next highest card and do the same. This will allow your higher interest rate cards to lower faster then paying the minimum on each card.

• Do not use credit cards for everyday expenses.
Credit cards allow you to spend with no worries in the beginning. This is a huge problem for those who have not self-control over their spending. The majority of the money that card companies make is from those who use their cards as a supplement for income, using them everyday on purchases such as their daily coffee, groceries, even gasoline. To ensure you are using your card correctly plan a budget every month for the expenses you will use it for. Keep it as simple and as cheap as possible.

• Have you budgeted and planned repayments?
Repaying your debt is not just about how much you have accrued but how fast you can pay it off. The quicker you pay of the debt the more you will save on interest fees.

• Do not borrow to pay off debt.
The last thing you should do is borrow money to pay off existing debt. More often then not you will make things worse, it gets to be too confusing on what is owed to who and when. The best advice keep it simple pay off what you can as fast as you can.

• Lenders are not your best friends!
Keep in mind that lenders are in the business to make money not to help you in your progress to become debt free. Many companies have numerous tricks to get as much money out of you as possible, making late payments, going over your credit card limit. All these things may have fees attached to them, not only will it cost you more money in the long run it will also hurt your credit score.

• Who are they for?
Credit cards are cheaper to repay then most loans. Newer credit card offers have a very attractive interest rate to begin with and the majority of the time they are cheaper then loans from local banks. If used at the right time for the right purchases you could save a bundle on interest payments. Before making any big purchases with your credit card make a budget plan to see what you can afford monthly and make sure you stick to paying on time every time.