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How Shrewd Credit Card Users Shop For Free |
By:
Jon Robson |
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How Shrewd Credit Card Users Shop For Free
Jon Robson
Most personal finance advice sites and debt organisations are in agreement that credit cards are the most expensive form of debt but with careful money management many consumers use credit card introductory deals as key part of their financial planning. There are even those who manage to use the almost mythical technique of credit card offsetting (where you make all your normal purchases on a credit card and then use the money saved to invest in a high interest bank account), although this requires an enormous amount of self-discipline to avoid credit card charges, let alone to make a profit. Before signing up for your credit card it pays to be aware of how to use introductory offers sensibly - here's our guide to the four most important factors to bear in mind.
Even limited research on credit cards will enable you to discover that they are one of the most expensive forms of debt, far more expensive than a personal loan, for example, and if you choose to pay only the minimum amount every month you could be paying a great deal of money to borrow a small amount. However, it is possible to use credit card introductory offers to your advantage, although the process of "credit card offsetting" has become more difficult in recent years as lenders get wise to serial card applicants. The good news is that you don't need to be a financial whiz kid to save money with your credit card - the following tips can help you get the best out of credit card introductory offers.
Firstly, beware of 0% balance transfers! Banks and other lenders have got wise to "credit card tarts" that continually swap between balance transfer offers; some lenders will charge a transfer fee. Others may even refuse your card application if you have taken advantage of their 0% credit card introductory offer in the past. Swapping cards too frequently to take advantage of 0% on balance transfers could even affect your credit rating as lenders are able to assess the number of credit searches against your name.
Many credit card introductory offers also include 0% on any purchases for a limited duration. Barclaycard Premium for example offers 3 months at 0% while others like MBNA Platinum fix the period on a specific date (in their case 0% on purchases until March 2008). However, it's worth finding out if the card you're interested in offers 0% on cash back. If not then you need to be aware that while it's convenient, it's not the same as using a cash point - every time you get cash back on your credit card you are borrowing money and will therefore be liable for interest on the cash. If your card doesn't offer 0% on cash back then it makes far more sense to use your debit card to withdraw cash.
On top of the 0% balance transfer and 0% purchases, there are a host of other "sweeteners" available as credit card introductory offers and again, it pays to cast a wary eye over these. The Virgin Credit Card, for example, offers discount at Virgin Megastore & Virgin Holidays, while Egg offers up to 10% discount at selected retailers. Both offers are excellent - if you already spend lots of money with their selected retailers. Other credit cards offer an extension of your lifestyle - the new Barclaycard OnePulse, for example, allies your Oyster travel card with your credit card while the MBNA WWF card guarantees a contribution to the World Wildlife Fund for every card. In both cases you're making a lifestyle choice, without necessarily saving money.
For most of us the bottom line is going to be the APR. Unless you're prepared to dedicate time and energy to highly efficient managing of your credit - certainly worthwhile, but not generally how most of us spend our time - then the most important factor in deciding on which card to choose will be how much will it cost us to borrow money on this credit card? Rates vary but are typically between 14.9% to 16.9% although Capital One are offering rates as low as 9.9% with their Platinum card. Whichever card you choose, it's important to remember that you will get the best out of your credit card if you manage your spending carefully and pay off your outstanding balance in full every month.
Jon Robson, a freelance writer with an inquisitive outlook on personal finance - in particular the uk credit industry - suggests that before you next use your credit card you should check the interest rates from at least one other competitive http://www.mbna.co.uk) uk credit card company.
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Article Source: http://www.statssheet.com/articles/article65224.html |
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