Are you ready to kick start the new year with a bang?
To help you do just that, I have put together a month long financial boot camp, with two tips per week and a call to action. Together, we will review several aspects of your financial life to make sure you start the year in good shape.
We have already looked at your utility bills and I put together a detailed guide about how to lower them, as well as your monthly debt payments.
Then, we talked about how you can reduce one of your biggest expense: your mortgage, and how you can challenge your council tax banding.
We also lowered your grocery bill, your leisure budget and your transportation costs.
Today, we are going to make sure you have the best credit card to pay for all those expenses.
Are you using the wrong card?
Everyone is different and you need to use the card that is perfect for YOU. For example, I travel overseas a lot. So the best card for me is a card that doesn’t charge me on ATM withdrawals abroad or any exchange rate commission on purchases.
Every withdrawal could cost me £10 in fees, for a £200 withdrawals, most cards charge a £2-3 flat rate plus 2-3% of the amount.
I do about 50 withdrawals per year, saving a total of £500, plus 2% on every purchases I pay with my card abroad. The correct figure may be closer to £1,000. For ME, that trumps all the cashback offers (I do have a Santander 1-2-3 account for cashback on council tax, utility bills and broadband), the reward/airmiles credit cards, etc.
But what about you?
Best card if you carry a balance
The best credit card for people who carry a balance and do not pay their cards in full every month is a balance transfer credit card. For a 3-4% fee, they will transfer your balance from your old card, and give you a 0% deal for the next 12 to 18 months. Do try your best to pay off the card by then, as they revert to very high rates in general. You can also do another balance transfer when your deal is up, but that means another 4% fee.
Make a note in your calendar so you know when the deal expires and can pay the card in full.
If you plan on transferring once more, know that a same financial group won’t accept your transfer, for example if you already have a card with MBNA, they won’t accept you transferring to another MBNA card.
Best card if you pay in full
As I explained in the intro, the best card for me as I pay my full balance every month, is the Santander Zero Card (unfortunately terminated if you were planning on applying) that doesn’t charge fees on any foreign transaction.
But the best card for you really depends on your lifestyle. If you do most of your purchases in high street stores and supermarkets, then a cash back card may be the best option.
If you travel like me, look for those fee free cards.
If you like rewards, you could get an airline card and start collecting miles.
If you are unsure whether you will be able to pay your balance in full every month, you should look into a low rate credit card.
Otherwise, if your balance is paid every month by Direct Debit, you don’t really care about the interest.
Credit cards also offer perks like ski insurance, travel insurance, breakdown cover, free airport lounges access, concierge service, lost keys and papers insurance, and much more. If you plan on getting a card with a yearly fee, write down all the perks you will use, their market value, and make a decision based on whether the savings are worth the card’s cost.
Set up a Direct Debit so you never forget to pay your card and never pay interest. If you withdraw cash abroad, the interest starts on the day you get the money, not on the card’s cutoff date, but if you log into online banking you can pay the card that same day and not pay interest.
If you are diligent enough and have a good credit score, you can get multiple cards, each for their benefits.
I also have a Virgin card that gives me 0% deals for 12 months every now and then. It now has a £0 balance, but I used it a few times to get cheap money to invest.
I will not use this card abroad as the fees are crazy high but it is good to still carry it in case of an emergency.
Action for the week
1. Open your last credit card statement(s). If you carry a balance, check out the rate, amount due, otherwise the terms and conditions on your card.
2. Check your credit score. You may have done that already when we talked about lowering your monthly debt payments and refinancing your mortgage. Otherwise, do a quick check, most sites offer it for free, and know where you stand.
3. Call your credit card company. If you have a balance, tell them you would like to hear their offer as you are about to switch to a 0% deal. They may match it or lower your rate. If you see the company offers perks on other cards, ask to be transferred or for the perks to be added to yours.
4. Rethink the fees. If you pay for your credit card, make sure you get more out of it than what you pay.
5. Drop me a line and let me know how much you saved 🙂
Like negotiating your bills or lowering your debt payments, checking out you have the best card once a year or so can result in great savings, and only takes a quick phone call or an online application. Good luck!
This post was featured on the Lifestyle Carnival, thank you!