How to make your credit card work - EDU

How to make your credit card work

With living costs still high, times are tough for households and consumers need to be a little more creative when it comes to their finances. 

If you pay off your credit card balance in full every month, you should take advantage of one of the many cards which reward you for your spending.

 Recent years have seen the launch of several generous cash back and reward credit cards which offer loyalty points or a monetary bonus every time you buy something using the card, providing a great way to generate a bit of extra income. 
Some cards offer points which can be redeemed against flights, while others provide points which you can use to get money off your shopping at certain shops. Alternatively you can simply opt for a cash back card, and get a percentage of everything you spend knocked off your balance. Certain cards will pay you the same amount of cash back regardless of where you are shopping, whereas other cards offer different cash back rates depending on where you use the card.
These cards are a no-brainer if you clear your balance without fail every month, as you are effectively getting something for nothing.

Don’t wipe out the benefits

You need to be much more careful if you don’t pay off what you owe each month, as reward and cash back cards can charge relatively high rates of interest.

That means that the interest charged on any outstanding debts can quickly outweigh the benefits of any cash back or loyalty points which you might have earned. Reward and cash back cards also rarely offer 0% introductory rates on spending or existing credit card balances, so you will be charged interest from the first month you have the card if you don’t pay off what you owe straightaway.

If you do find a cash back card which does offer a 0% introductory rate for a few months and you allow your debts to build up during this period, it is vital that you clear them before the standard interest rate kicks in and starts to eat into the cash back you’ve earned.

The best way to avoid falling into the trap of missing a monthly payment, and incurring interest on your spending, is to set up a Direct Debit from your current account to pay off the full amount each month.
That way you can be certain your credit card debt will be repaid every month without you having to remember to send off a cheque.

If you are considering applying for a cash back or reward card, bear in mind that the very best deals are only offered to those with an impeccable credit history. If you aren’t sure if yours is up to scratch it’s probably worth getting a credit report from one of the credit reference agencies such as Experian or Equifax before you apply, as every credit card application you make adds another “footprint” to your credit file.

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