Making the most of your credit card

Credit cards have become a very popular means of making payment for everything from groceries and every day purchases to holidays, Christmas gifts, luxuries, and more. People like using credit cards because their offer convenience, ease, and flexibility. The convenience and ease comes with being able to use a simple, easy to carry card to make purchases, and being able to make purchases in person, online, or via the telephone. The increased flexibility comes from being able to wait and pay for your purchases altogether when your statement comes through or being able to spread the repayments to increase affordability.

With so many different credit cards available on the market, with cards to suit all needs and circumstances, it can be difficult to decide which card will best suit you. Below are some of the more commonly asked questions relating to credit cards:

What are the main benefits of credit cards?

Amongst the main benefits relating to credit cards are the ease and convenience of credit card use, being able to make purchases online and by phone as well as in person, and being able to spread repayments on the purchases that you make. Credit cards eliminate the need to carry cash around, and are therefore more secure. The size and ease of use makes them convenience financial tools too.

Why is it important to avoid making cash transactions and withdrawals on credit cards?

Although you can make cash transactions and withdrawals on credit cards they are best avoided because of the hefty interest charges and other fees associated with such transactions. Also, if you have a rewards based credit card, such as a cash back card or loyalty points card, you will not receive any rewards for cash transactions and withdrawals.

What sort of transactions is classed as cash transactions?

Over the past year some credit card companies have expanded on the type of transactions that will come under the umbrella of cash transactions. This now includes cash withdrawals, online gambling, purchase of gift cards or vouchers, paying bills or mortgage repayment, and money transfers. If you are in any doubt always check the small print when you take out a credit card to ensure that you know what sort of transactions will incur interest and other charges.

I tend to repay my balance in full each month. What sort of card will be best for me?

If you tend to pay off your credit card balance in full every month then you will not be charged any interest, so trying to find a low rate credit card is pretty pointless. Instead you could benefit from a card that actually rewards you for using the card, and because you repay your balance in full your rewards will not be counteracted by any interest payments because you won’t be paying any interest. Instead, you can enjoy earning rewards, such as cash back, loyalty points, air miles, travel rewards, and retail discounts, simply for spending your card, and the more you use the card the more rewards you will earn. Do remember, however, that you will be charged for cash transactions and will not earn rewards on these transactions, so it is best to use your card to make purchases and avoid making any cash transactions if possible.

What if I want to spread the repayments on my credit card?

If you are planning to spread your credit card balance over a period of time, then it is a good idea to look for a credit card that offers 0% interest on purchases. This is because these cards offer an extended interest free period, so you can spread your repayments without paying any interest providing you pay off the balance within the interest free period. You will find that the interest free periods vary from one card provider to another, so it is best to compare and find one that offers the longest 0% interest period. However, do remember that cash transactions and withdrawals are not included in the 0% deal.

I already have credit card balances on which I am paying hefty interest charges. What can I do?

If you already have one of more credit cards with high interest balances you could benefit from a balance transfer credit card. You can then transfer the balances from your existing cards and enjoy a period of either interest free credit or low interest. With a 0% balance transfer card you will usually have to pay a transfer fee and you will have a set period of time within which to repay your balance in order to avoid interest payments. With a life of balance transfer card there is usually no fee, and you are charged a very low rate of interest for the life of your transferred balance