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Choosing Your Next Credit Card with CareHave you ever seen statements from credit card companies that almost encourage you to pay off your current debts, guilt free shopping or even earn cash using our credit card? Let us take each of these phrases in turn. "Pay off current debts" - Oh, really? That seems fantastic doesn't it? Well the credit card company will pay off your debts with other credit card companies in the form of a balance transfer. There are numerous balance transfer offers available in the UK today offering anything from 0% interest on transferred balances for 6 to 9 months. What is actually happening is that you are moving the debt to someone else, there is still debt and you will eventually still have to pay it off. There is a danger here that if you could not control your spending on credit card A what makes you think that it is possible to control your spending on credit card B after they offer a higher credit limit? More debt...? Seems like it! "Guilt free shopping" - Seems great too, but if you have money in your pocket you need to ask yourself a question, why do I need this credit card? There could be many reasons for this, each and every person is different, only you can answer this question. If you wish to use your credit card then fine there are advantages of this, we will tackle these later, but the main reason for people getting into financial trouble is borrowing more than they can afford. Don't let this happen to you! "Earn cash using our credit card" - Encourage the consumer to use the card, make more money because they can't afford to pay the balance at the end of the month by charging our interest rate on the credit card balance, in fact even if they pay the balance every month we still make money by charging the merchant to accept our card. The world we live in can be a strange place! The credit card company will charge interest on your credit card balance but will also charge the merchant (shop) a fee to accept this credit card, I think I am at the wrong end of this business!! Let us analyze the advantages of the cash back deal. The company offers 1% in cash back for anything that you spend on the card. OK lets buy that TV at £1000. Great making cash back comes in at a grand total of ...£10. That is fine I hear you say, just knocked another £10 of the bill. Well the credit card company has already made this and more from the merchant and then you have to pay off your balance. If you don't this is approx how much you will pay...
Even if you only use 1 month interest the overall cost to you will be at least £12.42, less that £10 cash back is £2.42, then if you don't pay this off the credit card companies really start to make their cash!!
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