Credit cards get a bad press but used in the right way they can actually help to manage funds more effectively as well as actually save money in some cases.
However, the key is ensuring that you obtain the right kind of credit card for your needs.
To do this it is vital that you are honest with yourself about how you will use the card. There is little point promising that you will keep it just for emergencies if you know you are likely to splurge every now and again.
There are many ways in which credit cards can be used without racking up insurmountable debts.
Some individuals like to use it to purchase all their monthly expenses, such as shopping, fuel etc and pay off the balance in full each month.
Others use credit cards for large items that would be difficult to afford in one go, whilst some people use their card purely as a source of emergency funds.
As a general rule, credit card firms are desperate to attract new customers and offer great incentives in a bid to lure people in. However, no matter how great the incentive sounds, you need to match your credit card habits with the right kind of offer in order to benefit.
For example, there are many interest-free or low rate interest cards currently on offer. Whilst this may sound like a good card to apply for, if you repay your balance in full every month you will never feel the benefits.
Customers who always repay their balance and use their card regularly would be better off opting for a kind that offers loyalty points or cash back for regular use; this could potentially end up saving them money.
On the other hand, credit card holders that only use their plastic infrequently and for large purchases will not find a card that offers a great loyalty scheme much use and would be far better off focusing on a lower interest rate.
The interest rate on offer is also one of the main features that individuals hoping to manage their debts more effectively look out for.
Anyone with a relatively good credit record should be able to obtain acceptance from the lenders offering 0% APR deals. By transferring existing debt to a credit card that charges no interest, balances can be repaid far more quickly and at little cost. The only drawback to this is that it is essential to take any balance transfer costs into account. If these are hefty, it can wipe out any savings.
Those who have had financial problems in the past and find themselves excluded from the financial market can start to rebuild their credit rating by using credit cards for bad credit. This kind of plastic charges a much higher interest rate but lenders are willing to consider applicants deemed to be a higher risk.
Whilst this might sound like a bad idea, taking out a card like this and ensuring the balance is repaid in full each month means that not only will the interest rate not affect you, the regular use and repayments will quickly rack up points on your credit file.
Finally, those individuals who use credit cards for several different purposes may find the best way to maximise the benefits and minimise the interest is to hold several different cards, with varying benefits and interest rates and keep their spending separate. Just don’t forget which card is which!