How to Make the Most of Your Credit Cards
Research shows that America is a country of credit card users. A recent study from the Federal Reserve revealed that, in 2010, almost 610 million credit cards were used in the United States.
This probably comes as no surprise given how convenient it is to spend using these little pieces of plastic and many lenders are now offering rewards to their more valued customers.
Credit card companies offer a variety of incentives to attract and retain customers. The cash back card is becoming more popular and for smart spenders, it can be very useful financially.
Cash back cards typically reward the consumer with cash back that is calculated as a percentage of their spending on the card. Generally, it ranges from 0.5% to around 2.5% and so it pays to research the options.
In the first three months these cards often offer a higher percentage cash back percentage rate of around 5%, so if you are considering a large purchase, this is the time to capitalize on it.
However, cash back cards are not for everyone. They generally have a high APR, which is the interest rate that you pay (APR stands for Annual Percentage Rate).
So you need to be sure that you can pay off your debt in full each month. Otherwise, you may be charged anywhere from 15% to 25% APR, which is a considerable amount.
However, if you are able to settle your bill monthly, you can reap the benefits of cash back. You are essentially being paid for shopping which you would do anyway, so it can feel like a great bonus.
Specific companies offer individual rewards for customers who take out their credit cards, so think about your individual circumstances and where you typically spend money.
If you travel frequently for work, for example, you may find a card from a motoring organization is beneficial because it offers a discount on fuel and includes breakdown insurance.
Other types of incentives offered by companies include the 0% balance transfer rate and the 0% interest rate. Used wisely, these incentives can be very beneficial to the customer. The 0% on the balance transfer amount can be used to give you some time to clear outstanding debts.
The balance transfer is normally accompanied by a period of 0% APR, which is the ‘interest’ that is paid to companies for essentially lending you their money.
There are clear benefits from transferring at 0% and using the 0% APR period to pay off these debts. However, companies typically charge a balance transfer fee of between 2% and 5%.
This means that in some cases, it would not be financially beneficial to transfer the debt because the fee charged would be greater than the interest currently paid.
However, if the math does work out, it can be highly advantageous. Consider this if you know that you are able to repay your debts within this time frame or that you are willing to transfer once again when your 0% APR period finishes.
There are many ways to get more from your credit cards, so do some research and find the best ways to maximize your rewards while minimizing your debts.
Article provided by moneysupermarket, the UK’s #1 comparison website. Compare a range of credit cards at moneysupermarket today.