Keeping Costs of Credit Card Lending Down
Not everybody’s credit card activity is the same, and some are more astute when it comes to handling their money. To help you decide which is the best credit card deal for you, here are four different examples of the kind of ways people use their card.
Paying your credit card balance off in full
If you pay for goods and services using your credit card, but pay off the entire balance every month, you will most likely not pay any interest.
You’ll find when comparing credit cards that some providers will allow you interest-free purchases of up to 59 days. This means that, providing you clear balance within that period, there’ll be no interest to pay.
But beware, because some providers may not offer any interest-free period, even if you do pay off your outstanding balance every month.
Paying off your credit card each month generally means no interest and therefore if you are someone who does this, interest rates won’t be an issue when it comes to credit card comparison.
Therefore, you’ll be looking at whatever other benefits the card comes with. Some providers offer loyalty points or cash back while others will make donations to charity for you.
Naturally, you’ll find that some will give out more than others, so if you really aren’t shopping around for the best interest rate, go for the card which has the top cash back offer or which gives out the most points.
Even if you are able to pay off your whole balance every month, it may not always be easy to remember. It might be a good idea, therefore, to set up a direct debit which means you’ll always have everything paid off promptly and won’t be subjected punitive charges.
You aren’t able to pay off the whole balance
If you can only pay off a bit each month on your credit card, it’s best to look out for one with a low rate of interest or one which comes with a good introductory offer.
Many providers will offer 0% interest on purchases and balance transfers for an initial period of time, which means you’ll only be paying off the amount of money you used to purchase goods or services or a balance you moved over from another card.
The trick here is to have all that outstanding debt cleared before the introductory offer expires. If you don’t, then interest will start to be added to your balance, this can be anything from 12% to 20%.
Another option is to transfer the balance from that card to a new one with a similar opening offer. This does mean you could end up switching cards every 12 months, or possibly a couple of times a year. If you don’t want to do this, then you should probably go for a card with the lowest standard interest rate.
Many cards will offer 0% interest offers on balance transfers and purchases, however both might not last for the same period. Look out for those that do, otherwise, while you’re still paying off you 0% balance transfer for example, interest will start to be added to your purchases.
As has been detailed before, the debt at the lower rate will be paid off first, leaving the other debt with the great rate to increase.
It can all be a bit confusing, but don’t worry, epepi.com allows you to compare the best introductory offers on balance transfers and purchases as well as those with the lowest standard rates of interest.
Shifting outstanding debt
Debts can quickly mount up on your credit card and it was calculated that an average of £2,060 was owed on UK credit cards in 2007.
If you want to start tackling your outstanding debt, you need to be on the ball and make sure you’re not paying way more than you need to.
Credit card companies will make you pay a minimum amount each month, but you should aim to pay off much more than that if you can. The minimum amount is often quite low and if your debt is anywhere near the average, it will take you a long time to clear it.
Most provides will want you to pay something like 2% of your overall balance, or as little as £5 each month. This won’t make much of a dent in your debt, and in most cases will just about cover the interest rate. So, the best thing is to do is calculate the most you can afford to pay off each month, while trying to pay the least amount of interest.
A lot companies will try and entice new customers with 0% interest on balance transfers for an initial period. This can be useful if you’re trying to chip away at that debt, even with a transfer fee of up to 3%, which will still work out much less than what you would be paying on standard rate of interest.
Many interest-free period will be at least 12 months and you should therefore try and have the balance paid off by the time the offer runs out.
Alternatively, you can switch to another 0% interest deal when the other one is up. Again, if finance isn’t your forte and you don’t think you’ll be alert enough to keep switching, make sure you choose a card which will have the lowest rate of interest in the long run.
On the road again
For regular travelers, there are more things to consider when comparing credit cards. Interest rates and introductory offers will be taken into consideration, but some companies will also have additional fees and charges for using your card abroad.
According to research by Nationwide Building Society, British travelers shell out around £300m a year in charges for using their credit card abroad.
Although the old plastic can be a handy way of paying for things when you’re on holiday or traveling for business, the costs can quickly add up.
Rates can also very greatly and are generally based on the wholesale rates of two of the biggest credit card companies, Visa and Mastercard. Your card provider will then pile on their own rate on top of that. You could up paying anything up to 3% for using your card abroad. Charges will generally be higher outside of the EU.
So if you are a frequent traveller and are looking for the best credit card deal, you should look out for the foreign usage charges, as well as what other useful feature they offer. For example, it may be comforting to know whether your provider will provide a replacement card if yours is lost or stolen or other assistance while you’re abroad.
At epepi.com, we’re sure we can find a credit card deal that will suit your circumstances. You can also speak to our credit experts on [creditcardnum]
Keep the Cost of Credit Card Lending down at epepi.com