Choose The Right Credit Card And Reap The Rewards
Credit cards have changed the way people deal with and spend money and often provide a much needed lifeline if things should get particularly tight one month.
However, there is no escaping the fact that credit cards, when used incorrectly, can cause untold amounts of misery and can lead people into a spiral of debt from which it can be difficult to escape.
The market is currently flooded with lenders offering a variety of credit cards with differing rates of interest and benefits but it is important to make sure that the right kind of card is selected, as it can be very easy to be led astray by a dazzling array of inconsequential benefits.
If you match the right kind of card with your spending habits, it can be possible to actually make money.
Yes you read that correctly, credit cards can actually bring gains…providing they are properly organized and set up.
Choosing The Right Credit Card
Some lenders offer good cashback deals and reward programs that can add up to literally thousands of pounds for free each year, but this only works if you are able to repay the balance in full each month. Having to cough up for interest payments will immediately wipe out any kind of profit.
Keeping a credit card for regular monthly expenses that are paid off in full at the end of each month can be a simple and easy way to make your credit card work for you. If you have work expenses that you need to claim back, using the card to pay for them is a double winner.
In this day and age, it’s rare to find something that earns you money for no risk, yet credit card reward programs can do just that, provided you are disciplined enough to ensure the entire balance is paid off each month.
Reward cards rarely offer competitive interest rates, so for larger purchases that will be spread out over several months, or for those individuals who know they will not repay their bills each month, a card with a lower rate of interest would be better.
The state of the economy means that less people are willing to consider taking on more debt, so credit card providers are working hard to get your business, meaning there are a lot of deals out there now.
The Importance Of Keeping A Good Credit Score
Running a good credit account will also have repercussions for the longer term, as a good credit score will mean that companies will charge you less interest on loans, mortgages or even future credit cards, another way in which using a card can save you money.
Obviously, the down side is that using a credit card in a similar fashion to a debit card, or using it to fund purchases that are far out of reach financially, means that any problems with repayment will be reflected on your credit file.
One of the lesser known facts is that a deterioration on your credit score can impact not just future borrowing, but can lead to lenders changing the deal that you are currently on. Whilst they are not allowed to hike up the interest rate on an existing balance, they can apply it to all future transactions.
A good rule of thumb for large credit card purchases is that if you cannot afford to pay for at least half of the price without resorting to credit, you should not be buying it.
The other point worth mentioning is that it can be very addictive seeing points and prizes mount up on a rewards card and whilst it is a good idea to put as much spending as possible on the card to reap the greatest rewards, it is essential to make sure you are not paying out for items you would not normally buy, just to qualify for greater returns.
And always keep in mind that the interest rate on your credit card will always outweigh the value of any cashback or rewards you are entitled to so it’s imperative that you pay off the balance in full at the end of each month so that you don’t incur any interest charges.
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