The Bank of England recently increased interest rates for the first time in ten years. This is likely to affect your savings, but also your mortgage and other borrowings including your credit card. Although the interest rate is still incredibly low, there are steps to take advantage of the change and any further – unlikely – increases in future. One of these steps is looking at your credit cards to see if you have the best deal. Also, with Christmas coming up, it pays to buy your presents, alcohol, food, and decorations with the right credit card for you so you can gain the rewards of doing so.
First Things First: Do You have the Right Credit Card(s)?
Realising that consumers are money conscious today compared to ten years ago, most cards offer incentives such as cash back, to gain Nectar points or discounts. If you’ve been using the same credit card(s) for many years, the chances are you don’t have the best deal. They already have you as a customer, so they don’t need to entice you to sign up. If you have a credit card tied to a certain supermarket and get bonus points for that supermarket but never shop there, you’re not getting the most out of your cards.
Use Price Comparison Sites
We use these search websites for buying foreign currency and insurance, but did you also know that most of them list credit cards too? They provide a list of handy features such as the relative cost (interest rates, subscription fees), perks (discounts, cashback, air miles, balance transfer rates) and terms such as maximum credit limits and the interest-free period that you have. This makes it easier to look for credit cards relevant for your needs.
Should You Have a Card with an Annual Fee?
One of the questions you are probably already asking yourself at this point is why you should, or should not, opt for a credit card with an annual fee. There are often extra benefits to using this type of card, typically in the form of lower interest rates and you should consider each carefully. A heavy credit card user is likely to get the largest benefit, especially if you expect to make lots of high value purchases. Frequent travellers can benefit from considerable reductions on the cost of flights or the ability to rack up air miles.
Put Everything on Your Credit Cards for Maximum Benefit
It may seem counterintuitive, but regardless of whether you opt for a fee-paying or fee-free credit card, any reward scheme is only as good as the number of times you attempt to use it. The usual advice applies here though – make sure you pay off the balance every month to keep yourself in the black. Allowing the balance to build up not only incurs debt and interest, it will also counteract the advantages of having the card in the first place. Many people also don’t realise that any purchase on a credit card comes with insurance and too few take advantage of it. This is essential when travelling.
Never Use a Credit Card to Withdraw Cash
Card purchases allow quite a generous grace period before you start to incur interest. That’s why it’s strongly recommended to pay off balances as soon as you get the latest statement through. However, if you withdraw cash from your credit card, no matter how small, you will incur interest from the day of the withdrawal. This can come as a shock to some users, so try to avoid it where possible.