FNTN

Introduction.

Although a very popular way to pay for our shopping is still with a credit card, recent years have seen some changes in the ways that we use our favorite bits of plastic. Ever since the banking collapse of 2008 and the ensuing recession people have been more wary about taking on debt and, subsequently, bankers debit cards have become a more popular way of paying for things with plastic and, especially for online shoppers, using online money accounts like PayPal has also increased. So just what are the net results of these credit card trend changes and how can we benefit from them?

Should you be using your credit card so much?

Air miles or points smiles?

Credit card companies still make a great fuss about how many air or sky miles you can earn by paying for things with their bit of plastic. That’s all well and good for business users who might have to do a lot of air travel or the richer of their clients who don’t have to be careful how they spend their money – but what about the average Joe and Jo? These days we’re unlikely to be able to afford foreign travel or even fly far in the States – so what use are air miles to us anyway? Which is where a bankers debit card can be more useful and profitable to us. Why – because these days you can earn reward points on just about any purchase you make. Rewards points are far more use to most of us. We can save them up and use them to help pay for an occasional treat or even use them towards a big food bill like for Thanksgiving.

Have you got too many credit cards?

Credit card interest rates.

Another reason folk are turning away from their credit cards whenever because they never seem to be offered to lowest interest rates that are advertized. Credit card companies have been quite sneaky in the past advertizing what seem to be incredibly low interest rates to entice people to take out their cards. Needless to say – if it looks too good to be true, then it is too good to be true and the reality is that only those with the very best credit scores will get the low interest cards. Before you know it, the card you’ve signed up for has a higher interest rate – all because you’ve got a poorer credit score. Finally the penny is dropping with people and they’re not using these high interest cards – as they know they’ll just lead to increased debt.

Are air miles really that much use?

Credit card fees.

Another thing that’s backfiring on credit card companies at present is up-front annual credit card fees - all for the privilege of using their card. Even worse, quite often these annual fees can only be used to help you to allow a companion to join you when using the air miles you’ve earned from your purchases – I think we’ve mentioned already how useful that is for most of us! Also be very wary of transfer fees when switching credit cards. These often used to be fixed fees, which on a large amount of debt could have represented good value. However, increasingly these days transfer fees are calculated on a percentage of the debt basis, making them not so attractive on larger amounts.

Don't get trapped into using credit cards.

Cashback cards.

Perhaps in response to debit cards being able to earn rewards points, credit card companies are turning to a new marketing device – cashback on purchases. A typical deal here will be a credit card giving you back 2.5% on any purchases you make, a 2.5% discount if you like. On a large value item that you can repay quickly, that is a great saving, for example on a $5000 home theater system you’d save $125. But don’t get carried away with this idea to quickly, the cashback percentage usually falls after an introductory period, although the credit card company may well offer the higher rate as an occasional treat once a year.

Time to cut up your credit cards?

Should we cut up our credit cards?

Unless you’re the sort of person that really can’t control their credit card spending and are already in massive debt – then no, you shouldn’t be cutting up your credit card right now. Credit cards do, still, offer a degree of consumer/buyer protection against faulty or damaged goods that debit cards don’t. Also, whereas when using a debit card the money to pay for your purchases is immediately taken from you – when using a credit card you do have a period of grace, in which you’ve in effect got an interest free loan. The trick, as always, is to pay off the credit card before the interest is added.