EuroAngel Graffiti

With the festive season soon to be in full swing, the temptation to head to the stores and splash out on our loved ones (and possibly ourselves in the process) is surely only going to get stronger and stronger.

Before you do slip your sensible shoes on and get your credit card at the ready, however, it might be worth your while considering whether you have the best deal for your spending habits. If you’re  looking for a new credit card  or feel it’s time to review your personal finances, here are some credit card tips on how to match your borrowing to your spending.

How do you shop?

Firstly, take a long hard look at your shopping habits – and be honest with yourself. When you shop, do you look for bargains, have a set amount in mind as to how much you wish to spend or plan to go out looking ‘just for one dress’ yet come back with two plus matching accessories for both?

Once you’ve figured out your spending style, take a look at the main types of credit card to help you decide what might be suitable for you.

Prepaid cards

These cards require you to load money onto the card before it can be used. They aren’t tied to bank accounts and do not come with finance charges or minimum repayments. You can only spend what is loaded onto the card, useful for impulsive purchasers! However, it’s worth noting that they won’t contribute to your credit score.

Secured credit cards

These are available from financial institutions such as banks or credit unions and are a good option if you have either a poor or no credit history. Like standard cards, a balance can be paid off each month, but as with prepaid cards, credit must firstly be added to the card. The credit limit is equal to the deposit loaded onto the card but can sometimes be a little higher too. Shop around for a secured credit card as different financial institutions charge different rates.

Limited Purpose cards

These are cards issued by stores or supermarkets and can only be used in the issuing retail outlet. Be cautious with limited purpose cards because, even they though they offer you credit, their monthly rates of interest can be extremely high.

Standard credit cards

Standard credit cards  have credit limits on them and require you to make a monthly repayment to repay a minimum amount of the outstanding balance. However, the longer it takes you to pay off the outstanding balance, the more you will pay in interest. Different credit cards can also vary in terms of what they offer – some of them for example offer 0% interest on balance transfers or store purchases. If you are relatively sensible with spending and have a good credit score, this is probably the best option.

Premium credit and charge cards

Premium credit cards usually have higher fees in addition to requirement a minimum income and credit score. Charge cards such as American Express should be used by high earners only. They come with a high annual fee rather than charging interest and have no spending limit in addition to other perks such as exclusive access to airport lounges or hotels. The outstanding balance must be paid in full each month.

Both comments and pings are currently closed.