Although many of us don’t practice what we preach, most of us think of credit as something that is to be avoided wherever necessary, and which has a good chance of getting us into financial difficulty or at least causing us to pay lots and lots of interest to the banks and credit card companies. Although it does pay to be very cautious of credit, you should not necessarily be scared of using it, especially because it is pretty easy to use credit to your advantage, if you know what you are doing.
Here are some simple tips that can help you use credit more to your advantage:
Use Balance Transfers to Stop Paying Interest
If you have one or more credit cards and you’re paying an astronomical amount of interest on them, it’s time to look for a zero interest balance transfer card. If you are accepted for one of these cards, you can transfer your current credit card debts to it, and thus avoid paying interest for between 3 and 40 months! That translates to a lot more money left in your pocket each month!
If you are able to find a low-interest rate, then taking out a loan and either investing it (if you know what you are doing), or placing it into a higher-interest savings account for a while, could actually make you money! But please remember that if you plan to invest, there is no guarantee that you will make any returns and you could end up losing money, so only ever consider this if you are really confident you know what you’re doing.
Use the Interest-Free Period for Emergencies
If you haven’t built up an emergency fund (and you certainly should), and a financial emergency strikes you down, instead of going to an extortionate payday lender or similar, apply for a credit card that will allow you to make purchases immediately, and which has a payment free period like the RCS Credit Card does. That way, you can use the card to pay for whatever it is you need without accruing interest assuming you pay off the balance within the payment free period.
Collect Air Miles
Another advantage to using credit cards is that many of them offer air miles or other rewards to their customers. So, if you use your credit card to pay for everything from your daily coffees to your household bills, providing you pay off the balance in full at the end of each month, you could actually be making money or the equivalent in travel or discounts, anyway!
Improve Your Credit Score
One of the most important ways that using credit can be of advantage to you is by building up your credit score. For example, if you have never used credit before, your credit score is not likely to be great because you are basically an unknown and lenders simply have no idea as to how well you will be able to manage your credit, so there’s a good chance many will turn you down. By taking out a credit card or loan designed for people with poor credit, and then using it responsibly, you can start to build up a credit history and improve your score, making it easier for you to get bank loans, mortgages and car finance in the future. The same applies to people who have a poor credit score through poor credit management in the past, but you do need to ensure that you use your new line of credit responsibly. You should also be careful not to use more than 25 percent of the credit available to you at any one time, as that could negatively affect your efforts.
If you’re making a big purchase, it pays to use a credit card to do so, not for the reason you might think; it saves you having to pay for it all in one go, but because you will be afforded an extra level of protection, making it easier to get your money back should anything go wrong with the purchase, and you be ripped off. If you do this, it’s still a good idea to pay off the full balance before interest starts accruing, though.
As you can see, there are numerous ways that credit can be used to your advantage. It’s just a matter of using it sensibly and avoiding the temptation to overspend or use the credit available to you in less than optimum ways.