Credit cards are still a bit of a dirty word in some quarters, associated with unsustainable spending and angry bills written in red letters. But they needn’t be.
Used correctly, a credit card could be your financial best friend. They just need to be managed shrewdly, and within your means.
A credit card can help you make purchases more secure, assist if travel plans go awry, allow you to service other debt more effectively, and potentially even earn you money and rewards.
So, read on to learn how to make the most of your card…
For most people, buying something priced between £100 and £30,000 might be considered a bit of a risk. So, for big purchases, it might be worth thinking about using a credit card because of the protection afforded by the ever-wondrous Consumer Credit Act.
Under the act, your goods are guaranteed by your credit card provider, even if you’ve bought them abroad or the seller goes awol – particularly handy if you’re buying from an obscure internet shop, for instance.
Reward and cashback cards are potentially very good ways to get the most out of spending you’d be doing anyway. However, they are only for the financially diligent.
To get the most out of rewards or cashback cards, you need to do as much of your spending as possible on them – everyday stuff like fuel, train tickets and groceries are ideal to get the numbers up.
But here’s the important part – you need to pay the balance off in full, every month. Otherwise, the relatively high APRs which rewards-based cards usually carry are likely to offset the benefits, or might even make you ineligible for them altogether.
A big fat nought
0% credit cards have the potential to be a real boon for a number of reasons.
As the name suggests, 0% cards offer interest-free periods on purchases or transactions. Providing you stick within the 0% terms and conditions period, they can be ideal for buying big-ticket items, paying for holidays, or even festivals.
Remember, the 0% terms aren’t unlimited, and only apply from the date when the card was taken out – not when transactions are made.
On the subject of 0% credit cards, they can also be very good for managing existing debt.
A balance transfer credit cards allows you to shift debt that you already have onto it. So, if you’re paying a high APR on an existing card, moving debt to a card with low or even 0% terms could save you money.
However, bear in mind that there is ususally a fee involved - normally a small percentage of your existing balance.
So do your sums and make sure that it’s worth your while.
Holiday (it would be so nice)
If your airline goes bust, your credit card provider can help you get home or find accommodation, providing you bought your flights through them.
As we’ve mentioned, the Consumer Credit Act helps with peace of mind when buying stuff abroad.
There are even cards specially tailored to travel, allowing you to spend abroad at lower rates than you would do with your debit card.
So, next time you go away make sure it's the first thing you pack.
Building and repairs
Credit ratings are strange beasts.
If you’ve had loads of poorly managed credit card debt then, unsurprisingly, you might find it difficult to get approved for loans or mortgages in the future.
However, if you’ve never had a credit card before, then you might find getting a loan or mortgage difficult, too, as you may have no experience of having debt.
This is where credit builder cards could come into play. By using them selectively, and paying them off in full every month, you can start proving that you can manage debt responsibly.