Expert Savings Advice

We all understand that credit cards can lead us into a debt cycle. It is so easy to pick up a credit card to use for a purchase even if we know we cannot pay it off right away. There are ways to avoid these issues of potential bad debt cycles. You can use a credit card that almost pays you to have the card. Reward credit cards are one of the many credit cards on the market that can be highly beneficial to you, if you understand how they work. The following will tell you how to use the reward credit card option without accruing debt.

There are numerous reward credit cards out there, from charity cards to travel cards. The most popular reward credit card is usually a travel card with air miles to accrue or discounts at hotels and rental car locations. We will use this popular card as an example. A lot of UK reward credit cards right now offer 1 mile or point per 1 pound spent. It means if you spend 30 pounds you should have 30 new points towards a free flight or other discount. Other reward credit cards can give discounts on fuel, office supplies, groceries, or give cash back for certain purchases. Cash back is often a 1 to 5 per cent amount of the purchase price. If you spend 10 pounds you may get 1 pound back for that purchase.

As you may realise the more you spend the easier it is to gain rewards points or cash back with these credit cards. The most important aspect of using rewards credit cards is to make it work for you. Look at the interest you pay when you have a revolving balance on your credit card. For example you decide to go with an air miles credit card with a 17.99 per cent interest rate. You spend 1000 pounds and earn 1000 miles in one month. You need at least 15,000 to 25,000 miles from most credit cards in order to get a free flight, one way. It means you would have to spend 1000 pounds each month for fifteen to 25 months. If you leave a balance on the card each month you would spend 17.99 per cent interest per annum, meaning you have a monthly periodic interest rate that is calculated and charged on the balance. If you spend 20 pounds per month on finance charges you are spending 240 pounds per year. You could obtain a flight for roughly that amount on a short distance.

The point being made is that reward credit cards offer you some great deals if you know how to use the card. You cannot keep a balance from month to month on the credit card in order to make it work for you. You want to have a 0 balance at the end of each payment period in order to make the rewards cost effective for you. You also need to take advantage of any double miles or rewards if possible.