Tips, Tricks & Traps in borrowing money: Purposes for using credit cards

Credit cards can also be very powerful financial tools, but only if used correctly. So, it’s very important the purpose for using a credit card. Below are a few purposes for using a credit card.

For purchases over the phone and on the internet 

When using a card for purchases over the phone and on the internet it is best to use a visa access card, which is used like a credit card but links directly to a person’s everyday account, so that that person uses only the money that he/she possess.

For occasional purchases

Most cards do not charge interest on purchases when the entire card balance is paid off within a specified time period (usually 44 to 55 days) So, this advantage can be taken when to purchase something unexpected and urgently needed, or when saving some money by purchasing goods on sale knowing that the entire card balance can be paid off in near future.

For minimizing the cost of the existing card dept

The cost of the card dept can be reduced by transferring the credit card balance to an other card with better interest rate or conditions. So, there are credit card companies that offer very low interest rates on balance transfers for a period of time.

For large purchases

Credit card interest rates are similar to those of personal loan, and they can even be cheaper. Unlike personal loan, set - up fees are rarely charged and many people find that they can get a credit card when refused a personal loan.

When using a credit card for large purchases it is very important to find out the amount of money that is needed to be borrowed, the conditions for a suitable credit card and to decide what is the amount that can be paid towards the purchase every week. The credit card calculator at http://fido.asic.gov.au can be helpful by calculating the interest that will be paid on the purchase and how long will it take to pay off the credit card. So, if the cost of borrowing is acceptable, the next step is to apply for the chosen card and see if a high enough credit card limit, to afford purchase, is received.

For large purchases - Interest free

Free periods on purchases are offered by retailers and these forms of finance are actually credit cards with extended interest free periods for these promotional purchases. These cards often have extremely high interest rates (15% above a standard low rate card) and high fees, so it’s very important that the purchase is paid back within the interest free period.

To determine the way to pay off the purchase before the interest free period, divide the purchase amount by the number of weeks(fortnights or months) in the interest free period and the result will be the amount that has to be paid every week (fortnight or month).