In these tough economic times more and more people are finding themselves short of cash towards the end of the month. When this is the case different people will take different action; some will assess their budget and look for areas to save money while others will turn to credit.
One particular type of credit that has continued to grow in popularity is credit cards. There are many reasons credit cards are such a popular choice; one of which is their versatility.
There is now a credit card to suit almost any financial situation; debt consolidation, credit building/ rebuilding, large purchases or even foreign spending.
While this has revolutionised the finance industry, it has meant that navigating the credit card market can be a task in itself. When in search of information regarding credit cards, you may stumble across web based forums or blogs.
These can be a good source of knowledge however often the information provided will be somewhat distorted and based on opinion rather than fact.
Not knowing the facts could land you in financial problems further down the line, which is why we’ve decided to put together this article. Here are 5 unknown facts about credit cards:
1. The dangers of missing payments on 0% interest cards
0% Balance transfer cards are a great way of avoiding interest charges when looking to get free of debt. They allow you to transfer the balances on outstanding credit or store cards and pay no interest for an introductory time period.
What many don’t know about these cards is that if you ever fail to make a payment you will immediately lose the 0% interest deal which means you’ll revert to the standard providers rate, which could north of 20%.
What’s more, your credit history is likely to be affected too which could affect your chances of being approved for low rate credit in the future.
2. Your credit history matters
When you compare card processing fees of different credit cards you’re likely to notice that the best rate cards will also come with a variety of perks such as cashback or rewards on spending, 0% interest on purchases or cheap foreign spending.
All these features are very attractive which is likely to make you want to submit an application. However, these deals will be reserved for those with immaculate credit histories; having anything less than this is likely to result in your application being declined.
Look carefully at the criteria prior to applying to ensure that you don’t waste any applications.
3. High rates are not forever
One particular type of card that may have taken your eye is the cashback card. When you spend money using these cards you will receive a percentage of the amount back at the end of the month.
You may notice that the best rate cards will offer in excess of 5% cashback on purchases, however this rate isn’t forever.
By reading the application carefully you’ll probably notice that this rate is only available for an introductory period of 3 to 6 months, after this you’ll revert to a much lower rate of 2 or 3%.
4. Repaying in full avoids all interest charges
If you’re a young adult who is looking to establish a good credit score then a credit builder card is a great starting point for you.
However, one thing that puts everyone off is the high APR that is attached to these cards. This shouldn’t be the case; providing you repay the outstanding balance on the card in full each month you will avoid all interest charges.
When trying to build your credit history it should be your aim to repay the balance in full whenever possible, if you are ever unable to do so then make whatever contribution you can.
Failing to make payments on time is likely to have a negative effect on your credit history.
5. You are able to set up a direct debit for the repayments
To ensure that you never miss payments on your credit card you should set up a direct debit for at least the minimum payment each month.
If you are then able to pay more than this you can do so, and if you’re not then you can rest easy in the knowledge that a payment will always be made and your credit history will remain unaffected.