There are many people that have credit cards but around half of people are in credit card debt. This can be useful sometimes, but not always and it is worth thinking about how credit cards work and how you can take advantage of them rather than them taking advantage of you and taking money from you each month.
How do Credit Cards Work?
A credit card is a form of loan. It allows you to shop in many places without having to pay with cash of debit card or spend any money right away. The money that you spend, goes on the card and then you will get a statement up to six weeks later where you will be given options with regards to paying back the money that you owe. The statement will give you two main options with regards to repaying. You will be able to repay the full balance and then pay nothing extra apart from what you have spent. However, you will also have the option of just repaying a minimum balance and pay interest on what remains. This is where you will have to pay a charge. They will tell you how much it is, so you can decide, but they do not tell you everything. Firstly, think about the cost and the fact that if you continue to pay just a minimum amount, then you will have to pay this charge every month. This will soon add up to a significant amount of money. Secondly, there is an option to repay more than minimum amount but not the full amount. This will allow you to repay more of what you owe, even if you cannot afford to repay everything. This will keep the charges down and hopefully will mean you can pay it off pretty quickly.
How Can I take Advantage of Them?
It is best to use a credit card and avoid paying any fees at all. You can do this by repaying the balance in full each month. You can even set up a direct debit to do this so you will never forget and never accidently be charged. You will need to be careful though and make sure that you track your spending. It is important to make sure that you do not spend more money on the card than you can comfortably repay. You may be able to track online how much you are spending or you can keep a note, perhaps in a book or on a spreadsheet.
Another thing to consider is whether getting a cashback card might be a good idea. These are not that easy to find but there are some issuers that will offer this service. These work by giving you some money back for what you spend and it is often a percentage. It will be a very small percentage and card issuers to this to try to encourage you to use the card more. You can take advantage of this by using the card for everything you buy and then paying it off in full so that you do not get charged. You do need to be careful though. It can sometimes be tempting to spend more money because you are getting cashback. Just remember that the cashback is a very small percentage and it is not worth spending extra just to get it and it cannot be used to justify extravagant purchases. However, it is a great bonus that you can take advantage of when you buy items that you were going to buy anyway. Make sure you think carefully about whether this would work for you.
