Credit Cards

There are lots of different types of credit card available and it is sometimes a bit confusing knowing which to choose. As we all have different needs with regards to borrowing, then there is not an obvious card which will be the best for everyone. Therefore, you will need to think about your needs when deciding whether a certain type of card will work for you. One example of a type of credit card is a reward card. A reward card might sound really fantastic, but you will need to think about whether it will work out well for you.

What are Reward Credit Cards?

A reward credit card is one that will give you something back for using the card. This might be cashback, vouchers or other things. They do not all work in the same way, but generally you will find that in exchange for spending money using the card you will get things back. So you might get a percentage of what you spend in cash or vouchers. It means that you can actually be paid for using the card which can seem like a really great thing.

Risks of Using Reward Cards
There are risks though. If you get more back in return, the more you spend on the card, it can be very tempting to use the card a lot. This is okay if you are using it for things you were going to buy anyway and perhaps using a card instead of cash or a debit card. However, it could be the case that you are tempted to justify spending more money because of the reward. It is so important to remember that the reward will only be tiny and spending extra money will mean that you are paying out a lot more compared to the very small amount that you get back. Therefore, if you thin that you are the sort of person that is likely to use a potential reward as excuse for spending money on things that you do not really need, then it could be wise to avoid this sort of card.

You may also find that the interest that you are charged on this card, will be higher than other credit cards. This may not always be the case, but often the lender will want to make back the money they are giving away, by charging more for interest. If you do not repay your card in full each month, then you will be paying interest and you could find that you will be paying a higher rate and actually if you went to a lower rate card you would be much better off even if you allow for the rewards that you have been getting. If you intend to repay in full each month, then it could be fine, but make sure that you are confident that you will do this. Set up a direct debit so that the payment gets made automatically and then there will be no risk that you will forget to pay it.

So, you can see that a reward card, can be really worthwhile and it can even give some extra money. However, you do need to be very aware of the disadvantages and make sure that you are confident that you will always be able to repay it in full each month and that you will not be tempted to use it as an excuse to spend more money than you can afford. Make sure you track your spending so that you know that when you need to repay it, there will the money available to do so.

If you have credit cards, then it can be a good idea to make sure that you repay them as quickly as possible. This is because this will make them a lot cheaper as you will not be paying interest for so long. Ideally it is a good idea to avoid paying interest completely and there are a few things that you can do which will make this easier for you.

Set up a Direct Debit

If you have no outstanding credit card debt, then set up your credit card so that you repay the full balance each month. If you do this you will never pay any interest (except in exceptional circumstances). So set this up so that the money leaves your account just after you are paid and then you will know for sure that the money will be there for you to use. The card issuer will be able to organise this with you so that you choose a date that suits you and they will be happy to set it up for that date each month as they will want to give you the best opportunity to repay the card too.

Keep Track of Your Spending

You will need to keep a track of your spending though. You will need to make sure that you do not spend too much or else you will struggle to repay it in full. You may not have enough money to pay it or even if you do, you may find that you will not have enough money to cover everything else that you need pay for. Therefore, make sure that you do not get carried away with your spending because this could mean that you will end up nor managing to pay for everything that you need.

Pay More Than the Minimum

If you already owe money on the card and cannot afford to repay it all in one go, then there are things that you can do to whittle it down. The first step that you can take is to pay off more than the minimum amount each month. The minimum amount tends to cover the interest and only a little bit more money which can mean that you will take a very long time to repay everything that you owe. If you keep using the card, it will take even longer. Therefore, it can be a good idea to stop using the card if you can and repay a bit more than the minimum amount each month. You can easily arrange this with the card issuer and tell them how much you would like to repay. Even if it is just a little more, it will allow the card to be repaid more quickly. The great thing is that each month you will be charged less interest because you owe less money and so the money you would have paid in interest will be repaying the loan instead so you will pay off greater and greater chunks each month.

Of course, if you want to pay off significantly more money you might have to think of ways to get more. It could be worth thinking about whether you have savings that you can use or whether you could earn more in some way. Perhaps selling things you no longer need, taking on a second job or doing more hours in your job could be things that will help you to be able to pay off some more of the credit card. It might also be wise to have a look in to your spending and think about whether you can reduce what you are spending in any way. Perhaps you might want to compare prices and see whether you can buy things for less or you could try to cut down on the amount of things that you buy.