So youre thinking of applying for a credit card. There are thousands of cards out there, all with their own pros and cons. So how do you go about finding the right one for you? Reward schemes, cashback, free balance transfers the list goes on. But dont fret. We are here to help. So sit tight and lean back while we run through the credit card basics to help you decide which plastic best fits your pocket.
Before you start looking for a card, there are a couple of things youll need to do:
- Consider your credit history. It is always advisable that you check the details in your credit report before applying for credit.
- Think about what interest rate and credit limit you can realistically afford to pay back with your salary. A credit is not free money.
Spreading the costs
Getting into debt isnt the most attractive idea. But, when handled properly, credit cards allow you to borrow money for big purchases that you might not be able to afford in one fell payment from your monthly wage packet. Bigger transactions can be made and the cost spread into monthly installments. This is a more viable option for some than to put the money aside each month and buy the item later. Perhaps you have a big event coming up, like a wedding or a self-funded business trip. It is also a good option for a sudden need for a larger sum of money. Replacing a broken house appliance or unexpected veterinary bills, for example. If this is the case, then a 0% purchase card might be the best for you. These cards allow you to pay a large sum upfront. You can then pay the amount back over a set and stated time without interest. This means you wont pay back more than you need to.
Clearing debt
Perhaps you already have credit card debt. Maybe you have multiple, smaller credit card debts. Save on extortionate interest rates or consolidate all of your debts into one account with a balance transfer card. This type of card will have a 0% interest introductory period. This may be for six months, or perhaps even longer. Transferring existing balances onto a new account gives you extra time to pay back what youve borrowed whilst swerving high interest. If you put all of your lendings into one account, you will only have to worry about paying back one monthly bill, rather than multiple bills from different lenders.
Reaping rewards
Card providers give rewards to encourage spending. So remember to not spend anything that you cant afford to pay back. That aside, rewards cards can be used to gain benefits for spending money which was going to be spent regardless. If you travel a lot, you might want to consider a card that rewards you with air miles each time you spend. If you spend a lot on food shopping for your family, then take a look at some supermarket loyalty credit cards. These are particularly beneficial if you shop in the same store every week.
For more general tips on how to manage your finances, take a look at my article on how to ensure your financial future.
