Credit cards, for some people, can be a bit of a minefield. If you aren’t keeping up with your payments, then this can land you in hot water. Ignoring problems with credit can have serious repercussions for you further down the line. This can mean you might struggle with being accepted for payday loans, and a small-term loan direct lender won’t look favourably on you if you down have a good payment record.
Local Personal Loans wants you to make the most of your finances, and manage them in a sensible way. To help you, we have assembled this handy guide which will tell you eight of the most important facts about cashback credit cards.
If you are unfamiliar with cashback credit cards, they are fairly similar to a reward card, just like your Tesco Clubcard, except you actually get a little more back on each purchase. Essentially, whenever you use your card to make a purchase, you will be awarded cashback. This is normally paid to you on a yearly basis, during the month in which you opened the card account.
Without further ado, let’s look at the eight things you need to know about cashback credit cards.
Your credit card company offers you cashback rewards as an incentive. But that incentive isn’t just to take out a credit account with them; they want you to spend, spend, spend. This means they can earn interest from your purchases and keep you in debt.
If you take out a cashback credit card, then it is good practice to set up a direct debit to clear the balance off in full when you the card out. That way, you’ll never have to pay any interest, and you can use the card as though it was just a normal debit card, as you’ll be paying the funds off with your wages each month. Then you can use the cashback card again the following month, earning more cashback.
Be aware that some credit card operators will not include the ‘pay balance in full’ option on their direct debit payment forms. This doesn’t mean you can’t do it, though. Just write ‘pay balance in full’ on the form, and the creditor should allow you to. Always check up on this once the form has been sent to the provider, though.
Using the card for all of your normal spending will help you maximise the amount of cashback you receive. Basically, whenever you use the card, you will gain cashback on your purchase, so use it for everything you would pay for with your debit card. That way you’ll make cashback on everything you’d normally spend money on in the month.
You can even use t to pay for work expenses, because you’ll claim these back at the end of the month, so you’ll gain even more from the card.
If your credit file shows a lot of credit card debt, then you are not going to benefit from taking out a cashback credit card. Make sure you have cleared all of your debts before applying for one of these cards, or you’ll find you’re worse off than when you first started.
Withdrawing cash from an ATM on your credit card is a massive no-no. Do, and you’ll be charged interest even if you pay the balance off in full, making the cashback element pointless. You’re meant to be reaping the benefits of these cards, not making matters difficult for yourself.
Likewise, don’t use them as a borrowing tool. If you need to do this, go for a short-term loan, or a 0% credit card.
If you’re not sure whether you’ll be accepted for a credit card or not, then you can usually get the provider to do an eligibility search on your credit file, rather than a credit search. This is sometimes known as a ‘soft search’ and means that your credit score won’t be affected if you are declined. It tells you the possibility that you are likely to be approved, so if it comes back with an ‘unlikely’, you know not to apply.
Companies like Noddle offer completely free credit reporting for life. This means that you can easily keep an eye on your credit score, any debts you have, and rectify any errors on your file.
Taking out a lot of credit is a bad idea, but so is applying for multiple credit cards – even cashback credit cards. If you find you need more credit, the best course of action is to wait three months before you apply for a cashback card.
If you have a cashback credit card then, like with all other credit cards, you are covered by Section 75 consumer protection. This essentially means that if you make purchases on your cashback credit card, you are fully protected for anything up to £30,000. This is because the card issuer is equally liable if there is a problem, and you can usually get a refund.
This is where the other advantage lies in using your cashback credit card as a debit card. Not only will you benefit from receiving cashback on purchases, but unlike a debit card, your purchases are all covered by the issuer in the event of a setback.