Smart Ways To Use A Credit Card – #AD

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Credit cards often have a bad reputation as a gateway into debt and truth be told, when not used wisely that can unfortunately be the case. Seeing a credit card as an easy fix to enable us to buy what we want when we can’t really afford it is an easy way to end up with unwanted debts that can be tricky to repay.

However, there are also plenty of smart ways to use a credit card to help with managing money which actually have some good advantages.

These include things like:

• Special offers and rewards
• Improving your credit rating 
• Protection on purchases

After having been in debt due to unwise use of credit cards earlier in my life, and working hard to clear that debt, I’m much more cautious about using credits cards now.

As a family we do take advantage of credit cards to help us manage our finances, but in a responsible way that avoids unwanted debt.

Here’s why we use credit cards and how we make the most of them:

• To earn cashback
  
  I love getting cashback and saving money, so we like to use credit cards that offer some sort of reward scheme.
  
  Our current credit card pays cashback and loyalty points on all purchases, so we try and use it for most of our everyday spending such as groceries and fuel purchases to make the most of the rewards.
  
  We then pay the balance each month to make sure we don’t incur any extra fees or interest.
  
• For protection
  
  If we’re making a large purchase, especially for things like holidays, we always try and pay on credit card so we’re covered in case of any problems. Under section 75 of the Consumer Credit Act, paying on credit card means that in the event of problems with your purchase (such as a company going under or receiving faulty goods) you may be able to claim your money back via your credit card company.
  
• For the 0% interest
  
  We try to always take advantage of 0% interest periods on credit cards, and when that period expires we tend to switch.
  
  Although it’s great to have an emergency fund, it’s not always possible and 0% credit cards are great for when you need an emergency purchase but don’t have enough savings to cover costs as it means you can pay back the money over time without incurring hefty interest fees on your borrowing. 

Using a credit card can also help to improve your credit score as keeping well within your limit and making regular repayments shows you are creditworthy and not a high risk borrower, which all helps to improve your credit rating.

HSBC have some tips and advice on smart ways to use a credit card to help you manage your spending:

• Choose the right credit card for your goals – Different credit cards have different benefits so it’s good to think about how you’re going to use it before choosing the card that’s best for you. You may want a reward credit card for your everyday spending, a card to cover a large purchase, or a card to consolidate your debts.
• Use the interest free period wisely – Paying everything off before the end of the interest free period means you avoid any interest charges.
• Set the right limit – Be clear on the purposes of your card and set limits accordingly. If you think a higher limit might encourage to spend more than you’d like then you can adjust the limits to help you manage your spending.
• Pay more than the minimum – if you can’t pay off the full balance every month then try and pay more than the minimum to reduce the amount of interest you pay
• Automate repayments – Make sure you always pay on time to avoid any fees by setting up direct debits to pay your credit card bill on time.
• Make the most of balance transfers – Using a balance transfer to switch to a 0% credit card could give you some breathing room while trying to pay off credit card debts. Make sure you’re clear on interest free periods and balance transfer fees.
• Let your credit card protect you – using your credit card to make purchases over £100 can be a smart move as purchases between £100 and £30,000 made on credit card are protected under Section 75 of the Consumer Credit Act. This means if something goes wrong, such as the company going bust, you may be able to get a refund.
• Look for rewards – using a credit card can often come with rewards, such as cashback, air miles or loyalty points, so keep an eye out for credit cards that offer these incentives.

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