Flashing plastic is an easy way to pay but if not managed correctly it can lead to several money issues. However, that’s not to say that people don’t love plastic credit and there have been steady increases in spending on credit cards over the last three months to March in the US.
This was unforeseen, mainly because the post-Christmas rush sees a decline in credit card spending for obvious reasons. That said, there have been several reports in the US that suggest that the amount of people carrying a large balance on their cards has dropped.
We’ve compiled several different credit card behaviors and the sorts of people who act in a specific way. Which do you fall into?
These are the people who keep their card balance to credit allowance ratio low. These people keep a low percentage of credit used to credit available – usually below 30% – to prop up their credit scores.
These people are also inclined to pay all of the balance off each month and are quite confident that their financial decisions will carry them through poor economic times. They can weather financial storms thanks to their nest egg.
These people have often had a torrid time during the financial crisis and ended up hurt by lowering lending rates. They may have had high credit utilization rates at one time, but nowadays are extremely cautious with their cash. They’ve changed the way they utilize credit and don’t like to spend more than they have to, enjoying sticking to a budget.
These are the people who have learned how to manage their balance and pay as little interest on their credit as possible by carrying it to a low-interest loan. These people have figured how to revolve with their cards to lower taxes. They are also well aware that paying more than the minimum will help lower their credit utilization rate. This helps them maintain a good or even excellent credit score and continue this smart revolving of credit.
These people don’t know much about personal finance and don’t pass heed of interest rates or credit scores. They often get into serious debt but seldom know why they do. They are usually younger and haven’t a massive amount of experience in this area. Many are still owed a lot of money from mis-sold PPI claims, while others often need to use payday loans to make ends meet.
However, they should learn to balance the books and pay a little more heed to financial advice as it can help them significantly in the longer term.
These are the four different sorts of card users – which one do you fall into?
Shopping Online With A Credit Card? Know Your Rights!
Credit cards can be a sensible way to shop online, particularly for more expensive purchases. This is because they offer protection should something go wrong or you change your mind. When buying things online, using a credit card is often a better option than a debit card. Section 75 of the Consumer Credit Act 1974 states that the credit card provider and the supplier are both liable if there is a problem with your purchase. So, for example, if you order an item from a company that goes bust and your item is never delivered, you are entitled to have your money reimbursed by your credit card company.
What You Need to Know
To get a refund, conditions apply. The price of the goods or services must be between 100 and 30,000. The amount of credit cannot be over 25,000. The credit-card provider must be in the business of lending money and the credit agreement made while the provider has been in business. There must be an agreement in place between the credit card provider and the supplier of the goods. If all these conditions are met, then you are entitled to protection and the credit provider and the retailer are equally liable.
Changing Your Mind
You are perfectly within your rights to change your mind about order within a certain time limit. You can cancel at any point from the time you make the order up to seven business days after it has been delivered. However, cancellations should be made in writing, by letter or by e-mail. If your item has arrived, you are obliged to return it. Beware of retailers demanding that goods need to be returned in their original packaging – this is not a legal obligation. As long as the product is returned in good condition, you are not in the wrong. Check the retailer’s terms and conditions, available on their website, to see whether they require you to pay the postage for a returned order. If this is not mentioned in the terms and conditions, it is up to them to pay. Some high-street stores allow you to take the product directly back to one of their shops.
Items Which Fail to Arrive in Time
Retailers have a maximum of 30 days to deliver your purchase unless otherwise stated by them. Most will give you a timeframe when you place your order. If it does not arrive within the designated timeframe, you are within your rights to claim your money back from the retailer. However, if the retailer disappears or refuses to refund you, it is up to your credit card company to give you your money back.
If you buy a product that turns out to be faulty, you are entitled to ask the retailer for a refund, repair, or replacement. If you have paid with a credit card, your credit card provider is also legally responsible. This is a little-known rule, but in theory, you can claim up to six years after buying the goods, depending on the type of product, how much you paid for it and how long it should reasonably last. You will find that price comparison sites are a great way of finding credit-card deals to make online purchases safer.
How To Make Your Credit Card Work For You
Credit cards are a responsible means of money once you remain informed and respectful of them. To help you in your quest, we’ve compiled a list of great credit card tips to ensure you don’t.
Knowledge is Power
Knowing the sort of card that best suits you and what you can expect from your card is so important and can really mean a card is a friend or a foe. Of course, the card you get is down mainly to your history – so, we’d advise you to pull your credit history first and take a look. This will show you how likely you are to get the card you wish.
Credit reports offer a good idea of what you can expect from your application, however, they’re not always right, and with a little bit of work, you can change things around to suit you. Check for mistakes on your credit report and contact the company if there are. These factors, though not true, may still affect your score, and rectifying them is something that must be done.
Depending on the credit score you have, you now have a choice of card. Credit cards with benefits and free perks can be ideal for some, whereas low interest rates and long days of interest-free fees are perfect for others. Decide on what card could be best for you.
Even when you choose a card that’s within one of the brackets – low interest, perks, or a card for those with poor credit, you should then compare different products within that sector. There can be a significant difference and all is not often as it seems, meaning you should be careful to compare credit card benefits. For instance cards with low APR may seem appealing, but may have high late fees and this can cause problems for some who thought they were getting a good deal. In short, read the small print.
Credit cards can be used to your benefit and by being extremely responsible and paying off your balance in full each month; you quickly increase your credit score. It also ends up saving you money on interest rates. Be sure to always pay on time and if you’re forgetful set up a direct debit to pay off the card. Finally, don’t go over or near your limit as this will really affect your score.
Check your card regularly. Most providers allow you to do so online in an easy manner and this can allow you to keep tabs on your card easily. Take care of details too and don’t access by public computer and don’t give details out to unsolicited calls or emails. If you do notice a problem contact your provider and the police – it’s better to be safe than sorry.
If you do end up in trouble then contact your creditor. It’s better to be responsible and often creditors set up temporary payment plans until you get back on your feet. Several non-profit advisory services can help.
By taking heed of this advice you can go a long way to making a card work for you.
How to Use Credit Cards Responsibly
Although credit cards often receive a bad reputation, they are actually a great way to build credit and an important financial tool to master. Credit cards must be used responsibly simply because when they are not, it can equal tremendous amounts of debt. There are qualities to look for in credit cards and practical tips to follow so that you can be more financially responsible.
- Payoff balances at the end of the month
When you decide on using plastic over cash, you are essentially signing a contract with that business. You are promising to pay, and you do so once you pay your credit card balance at the end of each month. Whenever this balance rolls onto the next month, it accumulates interest because the creditor is still paying off that purchase you made a month ago, and they want to be reimbursed. It is best to practice paying off credit-card balances at the end of each month now, or else you may find yourself over your head with debt.
- Decrease the credit limit
Many credit-card companies gain new customers every day because of the generous credit limits they give to them. This is also true for long-time customers as a token of appreciation. If you believe that a higher credit limit might be too tempting, politely let the company know you are not interested or to decrease your credit limit back to its original state. This is a mature and responsible move to make if you believe you will overspend and will show the company that you are a reliable customer.
- Avoid annual fees & cash advances
One of the easiest ways for credit-card companies to make money is through annual fees and cash advances. For some cards, it is necessary to have an annual fee, especially for business-related expenses; however, most cards will not come with an annual fee. Many credit cards have promotional periods, which offer no annual fees, so be sure to ask if it is solely promotional or not. If you are able, avoid cash advances on cash credits simply because of the interest rate hike it has. It is usually double or triples the interest rate you are currently paying. Seek out alternatives if you need cash and talk to a representative to see what your choices are.
- Pick a credit card that offers rewards
Although this isn’t a necessity if you can select a credit card that offers rewards on everyday purchases, like fuel or groceries, without too many holes to jump through, then go ahead and sign up. As long as you practice the above guidelines, credit card rewards will come in handy and are a great way to gift yourself.
Being responsible when it comes to using credit cards really isn’t that difficult, but it does require discipline because it is easy to overspend since the money seems endless. Credit cards do come with interest rates, so be fully aware of that when making purchases with them. Be financially responsible by paying off balances, not overspending, avoiding annual fees, and enjoying the little things in life.