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5 Savings Tips for Credit Cards
Before we get into the savings tips on credit cards that could help you out let’s take a look at a couple of things you might not know about credit cards. First credit cards are issued by banks. This means that the credit card companies do follow the base rate from the Bank of England. However, they usually tack on a very high percentage on top of the base rate for the unsecured loan they are offering you. The current average on credit cards is 15.9 to 16.9 percent. There are definitely a few credit cards on either side of this average. It is also important to thoroughly read the terms and conditions to make sure you aren’t falling into any traps with the credit cards.
Now for our tips:
- Get a credit card that doesn’t have any rewards or frills. Numerous consumers get credit cards because of the rewards such as cash back, air miles, or loyalty schemes. These cards can actually cost you more in the end. You feel like you need to use the card towards this purpose when you have it. The interest rates may look great. They may even offer a promotional sign up deal, but in the end you could be spending more on the card and not getting the rewards you thought you would. It takes several hundreds of pounds to get the air miles you are working towards. You can in fact buy an airline ticket for what it costs to earn that free flight with the interest you pay out each year on the card. Most cards have an interest rate of 15.9 percent APR. If you have a balance of 1800 pounds on the card you are paying roughly 500 pounds in interest for the year.
- Don’t pay the minimum balance, pay more. The minimum balance barely covers the monthly interest you are racking up on the card. This means you are usually not paying the card down, but paying the interest through the year. If you have ever wondered why your card balance isn’t moving this is why.
- Don’t use your credit card while you are out of the country. Usually there is a 2.75 percent fee for the use of the card overseas while you are on vacation. This is more than changing your Euros or pounds into the accepted currency.
- Don’t use your card in an ATM When you use your card in the ATM for cash withdrawals you are being charged an interest rate of over 20 percent with the 2.5 to 3 percent fee for withdrawing the money. Added to this high cost for using the card in an ATM you have the payment schedule in which the cash withdrawals are normally paid after the purchases and balance transfers.
- Lastly a poor credit rating can be affecting the interest you are paying. By adding yourself to the electoral roll, having accounts open longer, and paying off debts you can increase your score and get a better interest rate.
Credit Card Updates June 2008
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Saving the Planet with Credit Cards |
