Credit cards allow you to borrow money in a flexbile manner
and used in the correct way are a useful financial tool. Subject to approval
from the credit card company you can select:
- Borrowing limit
- Spending pattern
- Period of borrowing
- Repayment plan (subject to minimum payment)
Most people pay the full balance of their card each month,
with most spending being on purchases. By paying the full credit card balance
every month you will avoid paying interest on the money that you borrow by
making purchases however there may still be interest applied to cash advances,
credit card cheques and balance transfers.
Credit cards have many potential benefit and serious negative
aspects if used incorrectly.
Benefits
The benefits of using credit cards are:
- Short term credit for free as long as you pay your credit card bill every
month by the date on the statement.
- A safe way to buy online, over the phone and in many other scenarios where
the extra protection offered by the credit card helps reduce the risk of loss to
a criminal.
- Using a credit card can actually make you money if you take advantage of the
loyalty schemes that some card providers offer.
- Credit cards are accepted all over the world and are a convenient payment
mechanism.
Risks
Used incorrectly and irresponsibly credit cards can:
- Result in higher than expected levels of debt as you may find it difficult
to monitor spending on the credit card
- Mean charges if you don't pay your bill on time or if the borrowing limit is
passed. This can also result in damage to your credit rating meaning that it
will be harder to borrow.
- Cost you lots of money to pay off the balance if you only pay the minimum
repayment.
- End up being an administrative nightmare if you have lots of credit cards to
maintain.
To help make sure that you have a positive experience with
credit cards make sure that you alway tell the truth on application forms and
manage your finances sensibly. Most importantly do not borrow more than you can
afford to repay.
Remember
BalanceTransferReminder.com is not registered with The
Financial Services Authority and we are not a financial
advisory service. The Website is based on journalistic
research. Nothing within the Website is, or shall be deemed
to constitute, financial or other advice or a recommendation
to purchase any product or service. Any and all information
provided within the Website is for general information
purposes only. We strongly recommend that independent
professional advice is obtained before you purchase any
product and/or use any service via the Website.
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