Is it Worth Repaying my Credit Cards in Full?

Credit Cards

A majority of people will repay their credit cards in full each month. However, there are some people that do not and some which sometimes do and sometimes do not. It is a good idea to have a careful think about whether you should be paying them off in full or not. There are advantages and disadvantages to doing both and you should have a think about them so that you can decide whether it is something that you feel that you should do.

Advantages of Repaying Credit Card in Full

When you have outstanding credit card debt you will be charged interest on it. Once you have had your monthly statement and you have chosen not to repay the full amount that you owe, you will be charged interest on the remaining balance. This means that you will be paying a fee for not repaying the card in full. Credit card interest tends to be relatively high compared to some other types of borrowing and so you need to be sure that you are wise to be borrowing this money and that there is not a better way to get it. It is good to find out exactly how much you will be charged and consider whether you think that this is worthwhile.

If you do not repay all of your credit card then you will have less money available to spend on it the next month because you will have a credit limit and only be able to spend a certain amount of money up to that limit. The more you spend and have outstanding on the card, the less of the credit limit you will have left and this will mean that you could struggle to manage if you are looking to buy something expensive and you do not have the money. Therefore, if you repay it all, you will have access to more money.

Disadvantages of Repaying Credit Card in Full

If you repay the credit card in full each month it means that you will not have to money of your own available for other things. It could leave you short of money for paying all of your bills and other necessities. Although you will be able to buy some things on your card such as in shops, you may not be able to make bill payments and if you need cash it can be expensive to withdraw on a credit card as you start getting charged interest right away when you use one to make a cash withdrawal.

So, you can see that there are different sides to be thought about when it comes to deciding whether you should think about repaying your credit card in full. If you feel that you want to save the money and not pay interest then it is best to repay it each month in full. You can set that up to happen automatically and then you will not even have to remember to do it. However, you will need to think about whether this is something that you will be able to afford. It can be wise to make sure that you keep a check on your balance and spending so that you only spend an amount that you can afford to repay. This means that you will not risk getting into trouble when the bill is repaid in full. It also means that you will then have your full credit limit available to spend the following month and if you need something extra expensive then you will have the means available to buy it, which can be very reassuring and help you to feel secure too.

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Are Cashback Credit Cards Worthwhile?

Credit Cards

There are some credit cards which will offer the user cashback. These can seem very attractive but it is a good idea to understand how they work and make sure that they will suit you.

How Cashback Cards Work

The cashback credit card will normally offer a small percentage of what you spend on the card, back again. The money is credited to the card and you are able to use it to offset future spending on the card. The percentage tends to be very small – usually less than 1% but it is still some money that you will not have to spend and free money is always worth considering. The more that you spend on the card, the more cashback you will receive.

Interest Rates

It is often the case that a cashback card will have higher interest rates than some more standard cards. The card issuer will need to get back the money that they are paying out in cashback and therefore they will tend to charge higher interest. If you normally pay interest on your credit card then it is wise to be aware of this. You should do some careful calculations to find out how much you will be due to pay in interest based on what you normally have outstanding on your card and work out how much you will get in cashback and then calculate whether you will be better off looking for a card with lower interest rates. It will take a bit of working out and you might be wise to get some help with this, perhaps using the financial advisor at the bank that issues the card as it is likely that they will have different types and will be able to help you work out which will be the best for you.

Who Should Use Them?

So, these cashback cards are really most suited to people who repay their whole outstanding credit card balance when they get their statement. A majority of credit card holders do this and have an automatic payment set up to pay it off when needed so they never need to think about it. However, it is still wise to be wary of this sort of card. This is because it could make it more tempting to use the card because you know that you are getting cashback on it. This is fine if you are keeping a track of your spending, only buying things that you would have bought anyway but just using a card rather than cash or debit card and if you are confident that you will be able to repay it. However, if you think that the cashback on the card will tempt you to spend more money than you can afford because you have an excuse to use the card a lot, then it might be wise to not get this type of card in the first place. It is good to have a think about what might be most suited to you and whether you might find that you spending gets out of control as a result of having this sort of card available for you to use. If you have never had a card before then the decision could be more difficult, but it is a good idea to still think about whether you feel you are likely to use the cashback, as an excuse to spend more money than you were intending to and also whether you are going to be able to repay that money and stay in control of your finances or whether you need to find something with a lower interest rate.

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