How to Choose the Best Credit Cards

If you are looking for a credit card then you will soon find that there are lots to choose from. It is a good idea to make sure that you think hard about which credit card you choose because it can be really important. This is because the costs vary as well as benefits that you might get from the card.

Interest Rates

Card issuers will have different interest rates. The interest rate is what you will be charged if you do not repay your card in full each month. This rate will be variable and this means that the card issuer can change it if they want to. This means that it can be a good idea to compare the rates and see who is charging what. It is also wise to compare them regularly as you may find that they change and that you will benefit from switching to a different lender.

There are some people who always repay their card in full though and so they will not see interest rates as something that is really relevant to them. However, if you are picking a brand new card, then you may as well look into it. This is because you never know when you might be in a situation where you will not be able to manage to repay the card and this will mean that you will have to pay the interest. Therefore, considering it could be worthwhile, although you may find that there are other things that you might want to consider as well.

Benefits

Some cards have benefits or rewards for using them. This might be cash back or vouchers which the borrower is given when they spend money on the card. Often it is calculated as a percentage and the more they spend, the more rewards they get. This can sound fantastic as it means that they will be able to get something back. However, it can be wise to be wary. Firstly, if you choose a reward card, it is likely that the interest rates will be higher as the card issuer will need to cover the cost of the reward. This means that if you do not repay the card in full each month, you could find that you will end up paying out more in interest than you have gained in the reward compared to the interest that you would have paid had you taken out a standard card. Therefore, it is a risk using this sort of card if it is likely that you will not be able to repay the full balance each month.

Rewards can also be a risk because people might use them as an excuse to justify spending more money on the card than they normally would. They might think that because they get a reward for spending more money that it actually makes sense to spend more. It is well worth realising that the reward is tiny. It will probably be less than 1% cashback. It can be easy to think about what you have saved and concentrate on that and ignore the fact that you are actually spending more money rather than saving money. You might be spending a little bit less because of the cashback but you are still spending and that is money that you will have to repay. It is so easy to forget that you have to repay it at the end of the day and that it is not money that you are being given for nothing. If you think that you are likely to be tempted to overspend, then it could be a good idea to be very careful and perhaps to avoid a reward credit card.

Are Overdrafts Even a Good Idea?

It can be wise to think about whether having an overdraft is even a good idea for you. We are all different in our approach and attitudes towards money, so this is not a question that has one answer to suit everyone. However, having a think about what you feel about this and understanding more about how they work, what they cost etc will help you to decide whether they will be a good idea for you or not.

How do Overdrafts Work?

An overdraft is a way of borrowing money which is associated with a current account. Not everyone will be offered one as some types of account will not have them and also banks will check your credit record to see if they are happy for you to have one. They will then give you a credit limit which is the amount that you will be able to borrow up to and this will vary between banks and they may also base that on your credit record and salary. You will then be able to borrow up to that amount of money at any time by just spending it through your current account. So, you could take the money through withdrawing cash at an ATM, writing a cheque, spending in using a debit card or transferring it. So, it is flexible and means that it is quick and easy to get the money.

The repayment is quite different to other loans such as payday. There is no repayment schedule or anything like that but the overdraft will be automatically be repaid as you put money in the bank. So, when you get paid or whatever, the money will pay off the overdraft.

How Much do They Cost?

Overdrafts have fairly recently been regulated with regards to the way that banks charge for them so you may not be aware of the new rules. Things have been changed to make them much simpler so instead of a mix of fees and interest, now it is just interest that is charged and the same level for all borrowers. Banks vary in how much interest they charge, but it tends to be between 35% and 40% for most. Therefore, you might want to look around and compare them, although it is often a temptation to just stick with the bank that you are currently with because it is easier.

This cost is pretty high compared with other types of loans and so it is a good idea to think hard about whether they will be a good idea for you or not. They can be good as a back up plan for emergencies, so if you suddenly need money, you could use them to help you out. If you have time to organise a loan, then it will be better to look at alternatives and compare prices first to see whether there are any cheaper options available for you. It is always wise to do this because you never know whether you are paying more than necessary until you do a proper comparison.

Are They Worth it?

It is also worth considering whether having an overdraft will just be too much of a temptation for you. Some people will know that they have that money available and will feel like they should spend it. They might want to use the money to treat themselves. If you think that you might do this then it is worth thinking about whether you should really get an overdraft at all. It could be risky as if you use the money like this you will then have to pay lots of interest and somehow find the money to repay it as well. However, if you know that you will just use it for emergencies then you will not have this risk.

Should I get Several Overdrafts?

There are some people that have more than one overdraft. This is because they have more than one current account which have overdraft facilities and then they can borrow on both. There are pros and cons to doing this and it is well worth thinking through them all before you take out a second overdraft.

Advantages of Having Several Overdrafts

If you have more than one overdraft then you will have access to more borrowing. This means that if you need some money, then you will have two places that you can get it form. If you have already used some of your overdraft, you are more likely to have some left to use for other things. You will also have more money to fall back on in an emergency and even if you do not use it, it could give you peace of mind knowing that it is there. Once you have an overdraft facility set up, you will be able to use it whenever you need to and that means that you have very quick access to money. With an overdraft you can withdraw cash or transfer the money, use a cheque or it can cover a direct debit or standing order which means it is a very flexible loan to have access too. You will not have to wait for the money, unlike other types of loans which need to be arranged first, this can be arranged well in advance or may even just be there when you open your current account. Then the money will be there when you need it or you may never use it at all. It can be good to know that it is there. However, having more than one may be more useful for some people than others.

Disadvantages of Having Several Overdrafts

Although having access to more money could seem like a good idea there are possible drawbacks as well. Firstly, overdrafts are expensive. The interest rate on an overdraft tends to be between 35% and 40% and this means that you will pay out quite a bit for the privilege of borrowing the money. There are cheaper ways to borrow, for example a credit card is likely to be cheaper and a personal loan will be as well. Therefore, although it is convenient and there for you to fall back on, it could be wise to just keep it for emergencies.

There will be some people that will see the overdraft as their money that they can spend to treat themselves to things. This means that as soon as they get the money offered to them, they will start to spend it. This means that they will immediately be paying interest but they might not think about that and just be focussed on the items that they can buy with the money. This could leave them in trouble later as they could end up struggling to pay the interest or repay the overdraft. If they spend the overdraft, then if they do need money in an emergency, it will not be there for them to use. Therefore, it is really important to consider this.

Some people also have tow current accounts with overdraft facilities and have spent the money but only have payments going in to one of them. Payments going into your current account, such as salary and benefits, will automatically repay the overdraft. This means that the other overdraft is not being repaid as no money is being paid into the account, it will just be accumulating interest all of the time. It can even be easy to forget that it even exists. So, it can be a risk having two because you might just forget one and it is easy to not repay it.

Is it Important These Days to Have a Bank with a High Street Branch?

These days there are more and more banks which are struggling to keep their branches open on high streets. There are also banks which no longer have branches or have never had them. This means that you might question whether it is important to have a bank with a branch local to you or not. It is worth thinking about the advantages and disadvantages and this will make it easier for you to be able to make up your mind.

Advantages of a Branch

Having a local branch means that you will be able to pop in a discuss any problems that you have. You will not have to wait on hold for a long time or talk to someone in a call centre. This can be especially useful for those that have trouble with hearing people on the phone or who do not like making telephone calls. There is often the option of online banking but some people do not trust the security of online banking or they are not confident using their computer or they do not have a computer. For these people having a local branch is the only way that they will be able to do their banking.

It might be quicker and less confusing to deal with a bank than online. When you do transactions online, you may wonder whether it has been done properly, but have more trust if someone in a branch has done it as they use the system regularly and know what they are doing. It can be reassuring knowing this and if something does go wrong, it will not be your fault and so it will be fixed by the bank rather than you needing to try to rectify the problem.

Disadvantages of a Branch

If a bank has branches on high streets then they will be paying rent for them in most cases. This means that they will have these extra costs as well as the tax, utilities and other expenses that are associated with running a branch, including paying the staff as well. These expenses have to be covered somewhere and it is likely that they will be passed on to the customers and this could mean that loans are more expensive or that the interest that you get paid on savings is lower or both. So, you will need to watch out for this.

If you only deal with branches then it means that you will only be able to do anything within banking hours. This means that you can be a bit restricted. If you do telephone banking the hours might be longer and if you do online baking then you can bank at any time. This means that you can get a lot more flexibility. Of course, you may do both and have a branch that you deal with and also have online banking.

Some people may prefer having more control and being able to make transfers and check their balance and things like that by themselves. It might feel odd having someone else dealing with all this and they my prefer the independence and control they have.

Whether a branch is important to us a very personal thing. There are pros and cons and whether we want one can be very much influenced by what we are used to as well as what access we have to. It is worth thinking about whether a branch is something that you really need because when you are choosing a new bank, perhaps switching banks or choosing one for your child, you will need to think about whether this is something which is important to you or whether it is not something that matters.

Does it Matter What Bank I Use for my Child’s Savings?

Parents will often open a bank account or perhaps a series of accounts for their children. They might pay money in regularly, put birthday money in there or let their children decide whether they want to save their pocket money in there or spend it. It can be important to get your child familiar with the idea of banking so they can learn for when they get older and it is something that they will have to do. However, choosing the right bank is not easy. There are lots of places offering accounts to children and it is really important to get it right for a number of reasons.

Interest

The interest rate on children’s accounts can vary a lot and it can be bets to try to get them the best interest that you can. This will allow them to be able to get a good return on their money. Children’s accounts do tend to offer quite generous rates, but you will need to think carefully about what you choose. You can get an instant access savings account where they will be able to draw out their money right away. You can get a trust fund, which is often linked to the stock market and with those the money will be tied up until the child is eighteen years old. You can get an ISA which will have tax free interest, although it is highly unlikely children will have to pay tax on interest anyway. You can choose premium bonds although they may not provide any return at all if the bonds do not win the draw.

It is a difficult decision to make and you may even decide that several accounts might be the way to go. Perhaps something for more long term use and something for every day use. As the child gets older their needs will change too. As a baby they will not need to spend money as their parents will do it for them, but as they get older they may want to buy things for themselves and they may need access to their money to be able to do that.

Future Banking

As well as getting it right so the child gets as much interest as possible, there is a further burden on the parent choosing. This is that a child is likely to continue banking with the place that they banked with as a child when they become an adult. This means that they will need to think about whether they want their child using that bank. It is therefore wise to also think about the reputation of the bank and what they offer to all customers and think about whether you feel they will be a good choice. Consider whether they tend to be competitive on all of their products and whether they offer a good range of items.

Branch

You may also want a bank that has a local branch so that your child can go in and experience face to face banking so whether the staff deal well with children could also have an impact on your decisions. Although online banking is the norm, it is not something that tends to be possible with kids accounts and so they may have to have one where they can go into a branch to pay in and take out money. They will not be able to use a cash machine as they will not have a bank card and so this could limit them unless they can go to a branch in order to do this. Paying in can also be easier if there is a branch, especially if they are likely to be paying in cash which children are more likely to be doing.