Be smart with your credit card

Credit cards have so many variations that it is important to get one that is suited to your needs. In particular you need to get one that will fit your spending and repayment habits. If you don’t the card company will grab your cash in terms of interest or charges. The best use of a credit card is as a way to delay payment. If you do end up paying interest, then you should shop around – even change card – to get the best deal, i.e. the lowest interest rate. You can even have more than one card and use them for different purposes.

If you are regular spender, but will always clear your balance in full every month, then you are not interested in the interest charged for outstanding debt on the card – because you will never have to pay it – that is, unless the card has no interest-free period at all. That’s very unlikely because most credit cards only ask you to pay what you’ve spent by the due date on the statement, with no interest added until after that date. You can therefore get up to 59 days interest-free if you spend on exactly the right day. If you pay up in full every month, you should look for a card that has no annual fee and gives you something back – such as cash back or a reward scheme. These come dressed up differently, so it will depend where, when and what you want from your rewards as to what scheme you go for. A sure way to make certain you always pay your outstanding balance in time is to set up a direct debit for the full amount each month.

If you are regular spender and will usually – but not always – clear your balance in full every month, then it will make sense to choose a credit card with a low standard interest rate, and with no annual fee. If possible, get a card that also has a reward or cash back scheme.

If you are a regular spender, but will very rarely clear your balance in full every month, then you would be best advised to choose a card with a low introductory purchase rate (0% is best!), or a very low standard rate of interest. Also, if you have an outstanding balance on an existing card, then you should consider switching it to a credit card that offers a low balance transfer rate (0% is best!), though look out for the transfer fee percentage too. Plenty of cards offer 0% on balance transfers and 0% on purchases – both for an introductory period. Again, two cards may be worthwhile. Watch out for the interest rates after the deal period ends.

On the theme of transferring an outstanding balance, if you do have one, but will now be able to clear whatever you spend, look around for long balance transfer periods at 0%, but be sure to clear the debt before the interest kicks in again. Zero percent periods can be as long as a year.

If you would like a credit card, but have a poor credit history or are entering difficult financial circumstances, then it can be tricky to obtain one. There are some card providers who can help, but you’re likely to get a high interest rate, and be careful of applying – and being turned down – for too many, as this counts against your credit rating. Once you have a card, use it wisely and you can re-build a good credit history.

If you use a credit card to withdraw cash be aware that you will be charged interest from day one, and there’s likely to be a set fee to go with it, so use it sparingly for this purpose.

Another trip-wire can be using your credit card abroad. It will cost you a fee and a poor exchange rate, with a loading percentage. Check before you travel, but it’s best avoided if possible.

Some cards offer added benefits that may be of use to you. These can include domestic warranty cover for electrical goods, a price promise for a refund of the difference if you find the good cheaper elsewhere, and free purchase protection insurance against loss, theft or accidental damage.

Some cards make donation to a specific charity when you spend on it. Other recipients of donations by card companies include football clubs too, so you can help the team you support every time you use your card.

Some card issuers now use a price-for-risk strategy to determine the interest rate you will pay, This means that your personal circumstances and credit history will be assessed and you’ll be offered a rate as a result. The card issuer benefits by making the cards accessible to more people.

If you don’t pay off your bill in full every month, but have a 0% on balance transfers and do make purchases, then be aware that any repayments you make are taken off your transferred balance first and interest is applied to any purchases over and above your transferred balance. It’s a bit sneaky of the card providers, but now you know…