Credit Cards for Prudent Borrowers
Andy Britchford at moneyfacts.co.uk offers a variety of options for those of us who pay credit card balances at the end of the month.
“As the problem of indebtedness in the UK worsens, every day we either see advertisements in the press for the ‘best deals’, or have our door mats littered with ‘tempting deals’, with every company seeming to boast that it has the best credit card, loan rate or debt management solution.
“But not everyone uses a credit card in the same way. Many consumers don’t ‘carry over’ a monthly balance on their credit card, and therefore do not pay any interest charges. For these customers, the features they look for in a credit card deal are very different.”
“As the interest rate is not an important factor for those repaying their balance in full every month, the number of interest free days, donations, loyalty schemes and cash back deals are more likely to influence their choice of plastic. Of course these additional features would probably appeal to the majority of consumers, but for those holding a balance the number one priority must be to secure the cheapest deal in terms of interest rate.”
“Today, around 80 ‘incentive ‘ based credit cards are available, offering a variety of loyalty reward schemes and cash back deals. If you can be disciplined enough to use your credit card for your day to day purchases, while keeping the money aside to repay your statement at the end of each month, then it can be a win win situation. The beauty for the savvy consumer is that they can earn interest on the savings for that month, as well as receiving cash back or incentives ‘free of charge’ from your credit card provider.”
“So, if you are one of these customers that credit card companies make no money from, what deals are available?”
“Typically on a cash back deal, you can expect to receive between 0.5% and 1% of your credit card spend. So spending £10K on your credit card during the course of a year could earn you £100, not a bad return for doing nothing!”
“Loyalty schemes vary between lenders, both in the collection of points against spend and also in the conversion rate from points to value of goods. But it is important to remember that loyalty rewards are only good if you use them, there is no point choosing the highest reward scheme if the points can not be redeemed with retailers which you would use.”
“If you are not someone who pays credit card interest, why not take the opportunity to make some money from your card provider; after all it’s nice to be able to turn the tables every now and again.”
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