Benefits of Credit Cards
Sometimes referred to as a “necessary evil” is the credit card. Credit cards are seen to have a bad reputation by some – it seems that if someone finds themselves in debt or over-extended, the finger is always pointed at credit cards. It is correct that credit cards can be a reason for someone finding themselves in debt, but there are many other reasons why a person can find themselves in this position. The key is to understand that your credit limit comes with responsibility.
So, for example, if you are given a credit limit of £4,000, you technically have that amount to do with whatever you pay please. People fall into this trap however, when they do not consider how they will be able to pay it off. This is when people fall into real trouble in debt.
However, the fact is that credit cards, when used correctly and sensibly, can have a hell of a lot to offer. In this guide, we will be talking through how to make the most of the perks that a credit card company may be offering and what sort of benefits are typically offered.
Before we get into the rewards benefits of the credit card world, one major benefits of owning a credit card is that you do not need to carry large amounts of cash. You just need a small piece of plastic with you which lets you access an agreed amount of money, which can be useful in an emergency, for sure.
The obvious advantage of a credit card is the ability to delay repayment for something until the next month. We only have a limited amount of money and with regular expenses, purchases and emergencies, having the breathing space to repay something in a month’s time is a real bonus.
You also have the option to make a minimum repayment which is usually around 1% of the month’s fees. This will of course incur interest, but if you have a financial emergency or a large purchase that month, it offers some much needed breathing space.
Some credit card providers offer a rewards credit card which allows you to cash in rewards for using your credit card in certain places and on certain purchases or for simply using their credit card enough times.
An example of a reward which most credit cards will offer are air miles. By using and spending on your credit card, you will receive air miles which can be redeemed to go towards plane tickets – reducing the overall price of the ticket.
Please be aware that in some cases, the points you build up have to be used in a certain amount of time and can expire.
Some cards offer the option of cashback. For each amount you spend, you can obtain a small amount of cash back which can add up for future spending and savings.
Low or zero interest rates
If you have a credit card which has a zero-interest rate, it is usually for a short period of time or introductory period, however some cards do have more permanent low interest rates.
he benefits which are offered with low or no interest rates are very good. Basically, you are using someone else’s money (as provided by the bank) to then pay back that money when you pay off your bill for the cost of nothing. It is typically for good credit customers and new customers as a welcome bonus – but means that your costs for using a credit card are minimal, provided you have make the full payment on time each month.
However, one should approach with caution as some 0% cards will tempt you into spending a lot and then paying it off at a later date. This is potentially high-risk and can lead to debt problems. (Source: This is Money)
As mentioned before, having a credit card means you do not need to carry cash – and this is perfect for travelling abroad in a place which has different currency, especially.
Certain credit cards may charge a “non-sterling” fee for spending abroad, but it will only ever be around the 2.5% mark on each purchase made. Some cards do not charge this fee and they will give you real time currency exchange rates. This can save you money if you receive a better currency exchange rate.
Opportunities for bad credit
There are specific credit cards to assist those with adverse credit. Maybe you have been turned down by mainstream credit card providers, high street lenders and have even tried payday loans for bad credit.
A credit card for bad credit is available but at a higher interest rate. Compared to your regular 0% or 18% interest, the bad credit applicants may see rates of around 36% to mitigate the potential risk of default.
Still, it is an opportunity to get a cash advance, whether it is £50 or £100 and repay at the end of the month.
Build up your credit
There are credit cards specifically for building up your credit score. We understand that due to personal circumstances or unexpected emergencies that you can fall behind on repayments and this can affect your credit rating. Or equally, you are a young person who has just got their credit score automatically aged 18 and it is zero. You simply need an opportunity to prove your creditworthiness and build up your rating so that you can purchase a car, a house or even apply for more substantial loans.
This is where a credit builder card comes in. You get used to make small repayments every month and show that you are a good credit customer, and this will open doors for you financially in the future.