Covering the cost of the hectic Christmas period can be a daunting prospect.
Over the next few weeks millions of us will be hitting the high street armed with our credit cards, but by January, some of us may be woefully nursing retail hangovers.
Cashback cards can be a great way to earn money back on your purchases and make your card work in your favour. After all, who wouldn't want to receive money for spending?
Here are some quick tips on how you can achieve the most from a cashback card.
Cashback cards essentially reward cardholders for making purchases on their card. For each spend, a percentage will be credited to the cardholder tax-free.
Before looking at any new form of borrowing, ask yourself two questions:
Cashback cards are best suited to disciplined cardholders who are committed to paying off the full balance amount each month. Failure to do so means hefty interest rates will cancel out any rewards or benefits associated with the card.
Also, remember that all new applications for credit cards will create a 'footprint' on your credit history. Numerous footprints, caused by repeated credit applications, can impact on your credit score.
Priority should always be placed on paying off existing debt. Sort out any other debts you may have before taking out more credit or spending more money.
Ultimately, the more you spend on a cashback card, the more you will gain. For example, cardholders who place all their day-to-day purchases, such as groceries and fuel on a cashback card will earn more back.
As with all credit cards, your purchases will be protected by the Consumer Credit Act. This means that the card provider is equally liable should anything go wrong with a purchase you make on your card, valued at £100 or more.
Cashback cards must only ever be used to purchase goods.
Never use a cashback card, or any other credit card for that matter, to take out cash at an ATM as the cashback aspect of the card will not apply. You will also be charged high interest and incur hefty fees.
Also, whilst some cashback cards offer good balance transfer deals, remember that you will be charged interest, often at a high rate, until the balance is paid off.
As mentioned before, always make sure you can pay off the balance in full each month. Why not set up a direct debit to ensure the amount leaves your account each month, avoiding any hassle and giving you peace of mind?
Spend wisely. The prospect of receiving cashback for shopping can lead some people into thinking they have a licence to spend, spend, spend, which is always a big mistake.
Don't be tempted into thinking that you will be rewarded for unlimited spending. As with all credit cards, stay on top of your finances, spend sensibly and keep within your limit to avoid any nasty surprises and charges.
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Check out our guide to 'Improving your credit rating'
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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