Most people these days have credit cards and use them for all manner of things. There are many different types of credit cards and a cash back credit card can be one that looks appealing. However, it may not be the right choice for everyone.
What is a cash back credit card?
A cash back credit card may also be called a rewards credit card. It works by giving you something back when you spend on the card. Usually it is a small percentage of what you are spending. It might be paid in a cash credit to the card at the end of the month or you might get some vouchers or other rewards. It all depends on the specific card that you get.
It is well worth making sure that you choose a card that has rewards that you will make good use of. Everyone can use cash but they may get a better return if they find a card with vouchers or other rewards. However, these will be more restrictive as you will not be able to spend them on just anything. So think carefully and compare the different types.
How much does it cost?
It is worth noting that a cashback credit card may have a charge involved. It may be that you have to pay an annual fee for it or some other sort of charge. Often it will be that the interest rate is higher. This means that if you do not repay the full balance each month, you will end up paying a high charge for this. It is good to compare this as you may find that you will be paying so much in interest on the card and gaining so little in cash back that it would be cheaper to get a conventional card.
The cards do vary a lot though and so it is worth comparing them to see which looks like it has the best deal for you. Do bear in mind that interest charges will change at certain intervals so even if your card is really competitive at the moment, you could find that it will be less so in the future so do compare from time to time to make sure that it is still worth sticking with this particular card.
Who should use one?
If you are thinking of using one of these cards then there are several things that you should think about. You need to start by considering whether you will be at risk of overspending on the card because of the rewards. It is tempting to think that you should spend as much as possible in order to get more rewards. Although this is okay if you are just using your card for all of your normal spending and making sure that you have enough money to pay it off in full at the end of the month, this is not necessarily what people will do. It might be that they will use the rewards to spend extra on the card, buying so much that they cannot afford the repayments and buying more things than they need.
It should also only be used by people who pay off the full balance of their card each month. This is because it is generally more expensive to have a cash back card as the interest tends to be higher. This may not always be the case and you might want to check, but the issuers of the rewards cards need to make their money back somewhere – they will not want to be giving away more than they are getting back.
You also need to be sure that you will be self-disciplined enough to not use the card too much. Make sure that you will be able to afford to repay the balance in full at the end of the month. You may need to keep a check on the balance to make sure that you are not spending too much. You will also need to think about the purchases that you are making and make sure that you really need the items and are not just buying them because of the cashback. It is so easy to get muddled in the brain and think that if you buy the item for £10 you will get cashback so it is worth doing. However, the cashback will be significantly less than the purchase price, probably just a few pence, so actually you are not gaining those few pence but actually spending £9.98. If it is on something you do not really need then that is a lot of money to waste and if you do it a lot you could end up convincing yourself to buy all sorts of things you do not really need. So be very careful.
When you start looking or a mortgage you will find that there are lots to choose form. It can be rather daunting and you may just wonder how people make their decisions. Dome will choose to use an independent financial advisor to help them. They will be able to explain about all the different types of mortgages, help the home buyers pick the one that is most suitable for them and then show them which has the lowest interest rate. However, some people cannot afford to pay for a financial advisor or would rather do the research themselves. This will mean that they will need to know where to look.
Using a comparison website can help you to easily compare a number of lenders. They will usually compare them on interest rates and so you will be able to see which are the lowest. Although they are easy to use there are some problems with them. Firstly, the comparison website will get commission on any leads that they get and so they may only compare lenders which pay high commission. You will notice that they have a limited number of lenders and if you use more than one comparison website they may have different lists of lenders. Therefore, using more than one could help you to see a broader range of lenders but some lenders never appear on them anyway as they only deal with customers directly. It can be a good place to start though as it will give you an idea of the range of interest rates and what types of mortgages are available.
You may like to take a look in the windows of the lenders along your high street and see what mortgage rates they have and possibly go in to talk to some of them. Although there are advantages in having a local branch, many lenders only deal online so you will be limiting your choice. High street lenders have to pay high rent for their premises as well and are often well-known brands that pay a lot for advertising. This means that their prices tend to be higher. There is also no guarantee that the branch will remain on your high street for the duration of your mortgage and so this might mean that you will lose the advantage that you had of going with them.
You may like to go to individual lenders websites to look at rates This can help you to find those that are not on comparison websites. However, there are a lot of mortgage lenders and so you will have a job to know whether you have found all of them and it will be a rather time-consuming task. You might just look up companies that you have heard of, but you might be better using a search engine that will list a lot of them. However, many search engines have a lot of sponsored listings and so you might find that only that that have advertising and are therefore more expensive will be there. However, it could be a way to find lenders that have not cropped up elsewhere that could potentially appeal to you.
It is also worth noting that interest rate is not the only way to compare costs as there are other fees and charges that you might have to pay. For example, there will normally be a fee for setting up a mortgage and there will also be late repayments fees and early redemption fees to name a few. It is important to be aware of these fees, and which you will have to pay and which you might have to pay and include these in your evaluation to help you to properly compare the different lenders.
It is also worth noting, that although cost is generally the most important factor when picking a mortgage, there might be other factors that you should consider as well. A major one is how much the repayments will be as you will need to make sure that you will be able to afford them. You may also want to keep the term of the mortgage low, find a lender with a good reputation and hope that it has good customer service. Therefore, once you have found some which look like they have low costs, you then need to compare them on these other factors. It may be worth choosing one with a slightly higher interest rate if it means that you will be able to repay the mortgage quicker or afford the repayments more easily or go with a lender you trust. Obviously only you will know how much more you will be prepared to pay for these factors or you may find a low rate mortgage that fits all of your other criteria anyway.