Cash might one day become extinct and now it’s more about plastic. Whether you love or hate them you possibly cannot do without it. Yes, credit cards are everywhere and they’re fast becoming the norm whenever it comes down to purchasing products or services.
Financial institutions and banks offer benefits to those who use credit card for daily purchases in the form of cash back. This in turn makes it even more appealing for customers to have a credit card in their wallet.
Nevertheless, without proper understanding or usage one can easily enter the vicious cycle of credit card debts, which becomes even harder to break out of the longer it goes on.
So, it’s crucial to cautiously consider every type of borrowing or loan, along with thoroughly going through all aspects involved in it. Here are a few things that you must know about credit cards
- Unexpected Increases
Changes in the interest rate that is affixed to your credit card can have great impact on the monthly repayments. As such, it’s crucial to comprehend how the change actually works so as to avoid being caught out.
First and foremost, certain specific eye-catching rates are only available for the introductory period. It is likely to increase by the end of the approved period, so it’s significant that you’re completely prepared for the potentially sharp increase in your monthly repayments.
Additionally, credit lenders can modify the interest rate as long as there’s a warning of at least 30 days. For that reason, opening all your emails and posts that are linked to your account is important, especially if you’d want to avoid any unforeseen surprises.
- Credit Rating
Credit rating is one of the strongest indicators of your financial welfare. Looking after the credit card repayment is a necessity if you want a positive rating. However, mishandling of the borrowings can have an adverse and lasting impact.
Besides this, persistently switching the credit card balance or applying for a new credit card on a regular basis could perhaps cause the alarm bells to ring for potential providers. This would in turn make it look as if you’re the one who is reckless with cash, which is why it must be avoided.
- Annual Percentage Rate (APR)
One of the major misunderstandings that could occur here is because of the confusion between personal APRs and typical APRs. Typical APRs are what credit card lenders use to both draw customers attention and to permit easy comparisons between their cards and that of their competitors. Yet, it’s a generic number and isn’t always linked to what you’ll be actually paying.
So, it is crucial to cautiously take a look at the personal APR approved on any type of credit card so as to be fully prepared for the repayments. This way, it’ll help you to prepare a better budget and handle your cash flow, so that you have a better opportunity to clear all your credit card debts by the end of every month.
- Travelling Abroad
Basically, there are two hidden charges that you need to be aware of whilst using your credit card at the ATMs overseas.
Firstly, whether you’re withdrawing cash at home or abroad, you could end up paying over the odds in interest. Secondly, doing so while you are travelling abroad could incur something that usually credit card companies call as “loading fee”, which is an exchange rate conversion or administration fee.
It is often not clear until you receive your credit card bill, but credit lenders do charge you a fee for moving the cash from one currency to another.
- Online Booking Fees
Rules and regulations that surrounded the online booking fees were typically reviewed and tightened up in the year 2013. Yet, purchasers have to be made aware how of the charges are actually calculated.
Initially, businesses were able to automatically affix exorbitant charges on tickets that were bought online, thereby leading all the credit card users to pay over the odds.
Even though, the charges are no longer as secretive, it is crucial for all the credit card holders to be aware of the prospective additional charges when purchasing online.
- Payment Protection Insurance (PPI)
The underlying principle behind Payment Protection Insurance (PPI) was sound. It was designed as a safety net in case of mishap, illness or redundancy.
PPI was intended to assist the borrowers to meet their approved repayments during times of financial difficulty. However, controversy arose when it was finally found that many people were either mis-sold the policy or were entirely unaware that paying for PPI would be the largest part of the monthly charges.
As such, several customers have regained the money that they were charged; also the rules regarding PPI have been fully revised. Nevertheless, if you think that you’ve been mis-sold PPI on your credit card, then you ought to Claim PPI immediately to get your refund.
Tips to Manage Credit Card Debts
Credit cards have always got bad press, extensively being accused for putting people in debt, which professionals warn that it must be evaded at all costs.
But, when used in the right way, this flexible friend of yours would not only assist you in efficiently managing your money, but in certain cases help you earn extra money as well.
Nevertheless, once you’ve completely run up your credit card debts, it can be difficult for you to pay if off, along with the temptation to use it for more purchases.
Here are a few tips on how you can stay at the top of your credit card debts:
- Leave the Card at Home
Having that little voice of temptation in your wallet could easily tempt you to overspend. But, what if you leave it at home? This way, there will be fewer chances of you making unnecessary purchases.
Of course, there might be times when you badly need to use your credit card, yet by not carrying it with you; you’ll at least be making careful decisions instead of acting in the spur of the moment.
- If there’s no Money in the Bank, You could Use the Card as an Emergency Fund
Yes, you can make use of your credit card as an emergency fund when you have no money left in the bank. This simply means that you could use it to pay for urgent expenditure, which you can’t afford and but are in urgent need of. Say for instance, to get your car through the MOT, and not to purchase a new pair of shoes.
- Pay the Bill on Time
This might sound a bit too obvious; but it’s really surprising how most credit card holders forget to pay their credit card bill on time.
If you’re late in paying your credit card bill, then additional charges would be levied onto your account and you might also find that your provider has hiked up your rate of interest.
Yes, they do have the right to do so, as it is in the fine print.
- If You have Great Credit, Use a Card Offering 0% Interest Rate
Usually, credit card offering 0% interest rate is provided only to those individuals who have a whiter than white record. So, if you’re being declined by your lender, then you’re in good company.
Always bear in mind that although there’s no interest on the card, you still need to pay off the money, so it is not at all a free rein to go wild.
- If You’re Lucky to get Qualified for 0% or Reduced Interest Rate, don’t Breach the Terms
If you breach the terms and conditions, then it could lead to a cancellation of your special rates immediately. Likewise, when your introductory period expires, simply look around for some other provider, who may offer you a more competitive deal and cut the present card up. This is simply because interest rates on credit cards often jump exorbitantly afterwards.
- Explore Reward or Cash-back Cards
Even though you must keep spending at least a minimum on your credit card, if you have to make use of it and don’t have the 0% interest option, a cash-back or reward card might be offered as an alternative.
Spending on your credit card is barely a good idea; however, if you have to do it, at least make sure that you’re earning yourself some extra cash or benefits at the same time.
- Use a Monthly Budget to Plan for your Expenses
Keeping a budget helps to make sure that you have enough money left to cover all of your expenditures every month. Plan well in advance and you can easily take early action, if you feel that you might not have sufficient money with you to pay your bills this or next month.
A proper budget could also help you in planning to spend any additional money that you have left after covering all your expenditures. You could even use this additional money to pay off your debt quickly.