Credit Card Guide

Credit cards can be a great way to earn rewards for spending, but the truth is that many of us use them to borrow money over a period of months or years – rather than to take advantage of their benefits.

If you have debts built up on one or more credit cards, then your best bet is to make use of low-rate balance transfer offers to make sure that you are paying the lowest possible rate of interest (or to take out a personal loan).

Credit card companies have tightened their belts recently, making it harder for those in debt to find cheap deals. But there are still some attractive offers around.

It is, however, a good idea to keep an eye out for balance transfer fees, which are generally between 2% and 3% of the amount being moved across, as these can add up – especially if you have a large balance.

If you do not have credit card debts, but are looking for a cheap way to spread the cost of say a new television or holiday wardrobe, then you are better off with a low-rate introductory offer on purchases.

But if you intend to pay your card off every month, then a reward card such as American Express’ Platinum Cashback card, which at the time of writing gives you back up to 5% of any spending (although this falls to a maximum of 1.5% after three months), is definitely the way to go.

There are lots of different reward cards offering specific benefits such as air miles and discounts on certain products, but the money earned from cashback cards can be spent on whatever you choose, making them a more flexible friend for most people.

Store cards, offered by High Street retailers such as John Lewis, also offer some impressive discounts, and can therefore be useful for savvy shoppers.

But whatever you do, avoid borrowing on cards of this kind as they often carry interest rates of more than 25%, which will immediately wipe out the value of any benefits as soon as you start to build up a debt.

How can I reduce my credit card debts?

If your credit card debts are getting out of control and you cannot find another low-rate or 0% deal, then the most effective way of making sure you reduce – rather than add to – your problems is to cut up any cards you have.

This may seem dramatic, but it can be hard to give up the credit card habit when you are used to getting what you want when you want it – whether you can afford it or not.

And once you no longer have your cards, and have to spend only the cash coming in each month, you should be able to start chipping away at the debt you have built up in the past.

Another tip is to pay off as much as you possibly can each month.
Making just a small upwards adjustment to the amount you pay off each month can make a big difference.

Research shows that borrowers making a monthly repayment of 2%, or £27.68 on the average card balance of £1,384, would still be clearing the debt in 2039, while those paying 3% off each month would be debt-free in under 15 years.

Click on this link for details of the best balance transfer credit cards, introductory purchase and reward cards available.