What Are The benefits of Credit Cards?
A credit card can be a highly effective and flexible financial tool for the smart shopper – and saver. It has many obvious advantages over cash and cheques – and a few hidden ones too!
Consumer Rights
Credit cards are an excellent tool with which card holders can flex their consumer muscles. Goods bought on cards can be more easily returned, and refunds can often be made direct to the card rather than in the form of credit notes.
Purchase Insurance
Purchases made on certain cards are insured for up to sixty days after purchase, ideal for covering Christmas presents bought in advance. Any flights or holidays booked using a credit card usually attract free travel insurance as well, but the level of actual cover does vary somewhat.
Online delight
Despite the scare-mongering, paying online using a secure site is probably safer than buying over the counter even with chip and PIN. It opens up a whole new world of shopping, enabling card holders to buy direct from suppliers and have good delivered to their door. Online shopping for Christmas 2006 is set to rob the high street stores of anything up to 35% of their trade, experts predict.
In person PIN
Chip and PIN will become mandatory in major stores after 14 February 2006, so card holders should sort out their codes now. All cards offer the chance to change allotted PIN codes for something more memorable at cash point machines. The advent of Chip and PIN gives a whole new level of security to transactions, reducing fraud. Since fraud costs are ultimately passed on to consumers, this can only be a good thing! Card holders are required under the terms of their agreements to keep their PIN details secret.
Knowing their Pin card also allows the card holder to withdraw cash from a cash machine on their credit card. The savvy card user, however, knows this is an expensive option, to only be used in dire emergencies on cards with no outstanding balance transfers.
Horses for Courses
There are a wide variety of cards that offer real benefits for different kinds of usage.
Cash-back: Cash-back cards pay back a percentage of the monthly spend as a credit against the next month’s usage. Pay off the balance every month, and these cards become a source of income; leave the balance and the interest charged will wipe out any net gains.
Rewards: Spending accumulates points which can be redeemed against an enormous range of goods from wine to cars. Card holders can also get discounts at other participating stores or against online services. Again, leave the balance untouched and the interest charged will wipe out any net gains.
0% on purchases: In effect, an interest free loan for the 0% period provided the minimum payment is made. Savvy savers stick the equivalent of the balance due into a savings account and pay off the entire amount from that at the end of the 0% period. Try reading our article on Make Money Using Credit Cards for an alternative look at 0% purchases
0% balance transfers: an interest free loan provided the minimum payments are made. Smart card users can shuffle money from cards where special deals have run out and pay back the balance over time at 0%.
Prepaid Cards: For those who find it difficult sticking to a budget, these cards allow users to prepay a certain amount onto the card in advance, and spend only this amount and no more.
Web cards: Cahoot have launched a web card especially designed for online purchases that offers a ‘floating’ card number. The same card number is never used twice, so fraudsters cannot steal the card details. The user can also set a ceiling for spending.
Introductory Offers: the canny card holder can be the winner in the perpetual race for new credit card customers. Card companies offer a huge range of incentives apart from special rates, including cash credits and bonus points. Increasingly they are also offering existing customers incentives to stay, such as 0% balance transfers.
Building Credit
For those needing to get onto the financial credit rating ladder, credit cards can prove an ideal start. Applications for any credit start to build a credit score, and careful use of a credit card can build that score quickly. ‘Bad credit’ credit cards also benefit those who may have had financial difficulties in the past, and need to rebuild a better credit rating.
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