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Credit Cards - The Basics
By Ethan Hunter
How Lenders Operate - And How They'll Make a Tidy
Fortune from the Unknowing
Credit card companies might seem like immensely clever,
money making enterprises that exploit every loophole to
maximize the interest payments - and profits - they are
taking from you every month. Nothing, however, could be
further from the truth. These financial institutions operate
on simple principles and exploit the fact that consumer
demand and their customer's naivety will keep business
turning endlessly over.
It doesn't have to be that way, however. Know what to
look out for and you can cut your overheads and stop these
businesses from making a dime more than they have to.
Lenders exploit the fact that people use one card for many
purchases. For example, if you use a balance transfer
special card rate for spending in the supermarket or mall,
they deliberately structure repayments in such a way that
you'll pay a fortune on the entire balance. To properly play
your plastic you need to deploy an army of cards as
weapons in the war against consumer debt. Using the right
tool for the right job will smash your credit card costs.
If you already have hefty credit card bills, transferring the
balance will usually substantially cut your interest costs.
What this means is that your new provider pays off the
debts on your current credit or store cards for you.
You then owe the money at a (hopefully) lower interest rate
for a fixed - or sometimes indefinite - period of time. The
key to making this work is by not using this card for
spending. What this can mean is that credit card providers
will then revert the interest rate for the WHOLE of the
balance up to a higher rate.
Consumers who spend on a card, but don't clear the debt
each month should focus on minimizing the interest cost.
Search the market for the lowest purchase rate available,
but also keep in mind the day when you'll clear the balance
in full (e.g. Bonus time; when your bonds mature, etc.) and
don't let the balance spiral beyond your means.
If you pay off your balance in full each month then the
interest rate is irrelevant. Focus instead on the gains
available from using the card for spending. The key to this
is the reward scheme offered. Many credit cards offer
points schemes or even cash-back. There's a huge array of
different schemes, but by picking the right one you can
benefit substantially. It's often simpler just to go for a
Cashback card, where the benefits are more apparent, but
sometimes reward schemes offer great inducements -
particularly when they offer double points to new
customers, and so on.
If you're one of those lucky people to be debt free you can
take REVENGE on the credit card companies and make free
dollars from their products. The schemes are simple to
manipulate. If they lend you money at 0%, you can bank
the cash and earn interest on it. There are a variety of
mechanisms that allow you to get money into your savings
account quickly and easily. Once its in, just let it sit there
for the duration of the interest free period and pay it back
in full when it's at an end. Substantial amounts can be
made from this, but it's a strategy that should only ever be
used by consumers with a good credit history, no debts and
are prepared to make a little effort.
Store cards should be avoided under almost all
circumstances. They charge the highest rates of interest,
and by being offered at a department store counter are an
easy lure into a mine of consumer debt. You should never
use them to borrow money on, and if they offer any perks
and benefits make sure they work for you. For instance,
some offer a 10 per cent discount on first purchases. If
they do so - make sure you take them up on it when
buying something big, thus maximizing your saving. As a
rule, however, avoid these expensive options like a plague.
Stick to a credit card that charges low interest on purchases
and you'll be fine.
Some people, however, simply can't get new credit cards.
Sometimes there are quite valid reasons for this, but on
other occasions it can be due to incorrect information held
on your credit reference file. Apply to a credit reference
company, like Experian, and check that there are no
erroneous black marks on your record. Beyond that, there
are a variety of simple strategies you can apply that will
boost your credit score and help enable you to get the best
credit cards for your needs. In a position of strength, you
can then make credit cards work for you.
About the Author
Ethan Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any other type of credit issue please visit us at http://www.creditcardunlimited.com
Article Source: http://www.simplysearch4it.com/article/8844.html
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