Top Reasons For Using a Credit Card

by Kate on August 20, 2014

in Money

It can be all too easy to dismiss credit cards simply as a path to overspending and debt. However, used appropriately, they can be a fantastic way of managing your finances. Knowing when and where your credit card can come in handy really can be the key to making your money work for you.

Managing Your Borrowing
Even if you feel you are already at risk of falling into debt, a credit card could actually help rather than hinder you. Whether your debt is in the form of existing cards, secured loans or other types of borrowing, transferring an existing balance can help you to cut your spending. By searching for balance-transfer deals that come with a lower interest rate than the one you are currently committed to, you should be able to save some of your hard-earned cash.

Consumer Protection
Perhaps the most common reason for people taking out a credit card is the protection it can give you as a consumer. In fact, if you pay for any goods or services worth between £100 and £30,000, you are given a safety net as a result of the Consumer Credit Act. This can be particularly useful when it comes to paying for the likes of holidays or other big ticket items, as you are protected in case anything goes wrong.

Cashback on Your Card
Although it’s not applicable to all credit cards, some come with cashback incentives intended to encourage responsible borrowing. To make the most of a cashback card, you must be able and prepared to repay the full amount borrowed each month, as this will trigger either a cash payment or an annual discount on your borrowing as a reward for managing your borrowing.

Holiday Spending
Holidays are expensive enough without the often unwelcome surprise of some of the more hidden costs associated with getting away from it all. Using a debit card abroad will often incur what is called a ‘foreign loading fee’, which can dramatically add to the cost of spending whilst away from home. Although it is not a universal feature, many lenders will remove this fee, making credit cards the best option when planning an overseas break.

Improving or Rebuilding Your Credit Rating
Anyone who is interested in keeping on the right financial track will be aware of how important a positive credit rating can be. Many lenders will use a person’s credit score as the starting point when deciding whether they are a reliable borrower or not, although some do not rely on this exclusively. Therefore it is important that your file is reflective of your finances.

Just as too much borrowing can impact negatively on your overall score, too little borrowing can also be damaging. It may be the case that you are looking at homeowner loans to make some property improvements or secured loans such as these ones from Evolution Money, to buy a big ticket item such as a car, but you are unable to prove your financial reliability. By taking out a card and managing your repayments sensibly, you will be in a better position to take on borrowing elsewhere. So taking out a credit card can be an essential part of taking control of your credit score.

Keep on Top of Things
Whatever leads you to take out a credit card, it goes without saying that it must be managed properly in order to get the best out of it. But if you manage your budget and meet your financial responsibilities each and every month, a credit card really can be a good thing. It’s important, however, to compare different types of card before applying for one.

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The latest PPI payout figures have been released by the Financial Conduct Authority (FCA). In April £410.3m was refunded, making it the highest payout month of 2014 so far, beating January by a substantial £21.1m.

Seeing as April represents the 40th month that payout figures have been recorded by the FCA we thought it appropriate to have some Ruby anniversary celebrations! And by that we mean a blog post all about PPI claims compensation.

£12.5m refunded every day
The most common figure bandied about to do with PPI claims is the set-aside figure, currently £22bn, this is the total amount the banks have put to one side to cover PPI compensation. But what we hear less about is the amount that’s actually been refunded, currently £15.1bn since January 2011 or £12,592,592.59 every single day.

By using a magical PPI claims calculator we can work out that £15bn over 40 months puts the average monthly refund total at £375m, but some months have seen much more refunded with one returning over £735m to mis sold consumers. The figures are derived from compensation data released by 24 firms that made up 96% of complaints about the sale of PPI last year. Here’s the breakdown:

Monthly PPI payouts

Jan £389.2m
Feb £329.5m
Mar £349.8m
Apr £410.3m

Jan £439.3m
Feb £409m
Mar £375.9m
Apr £424m
May £422m
Jun £498m
Jul £528m
Aug £446m
Sep £444m
Oct £524m
Nov £425m
Dec £324m

Jan £405.4m
Feb £473.1m
Mar £501.6m
Apr £572m
May £735.3m
Jun £614.6m
Jul £512.3m
Aug £601.4m
Sep £516.4m
Oct £578.2m
Nov £410.8m
Dec £360.1m

Jan £36m
Feb £36.1m
Mar £32.4m
Apr £28.6m
May £39.8m
Jun £66.4m
Jul £103.2m
Aug £244.5m
Sep £225.3m
Oct £321.9m
Nov £464.4m
Dec £535.5m

PPI payout patterns
If you analyse the payout figures you can begin to see patterns. Payouts tend to peak in the middle of the year, possibly because people start the new year thinking about their finances and make a claim. Claims usually take anywhere from six to eighteen months which backs this up.

May 2012 saw the highest compensation bill, 12 months after the High Court case that kicked off wide-scale claiming – at the time there was a 12 month delay from claim to payout. Talking about the April 2011 court case, you can clearly see the impact on compensation payouts. January 2011 saw £36m refunded, by December over £535.5m was refunded, that’s over £500m more being refunded in the same time-period.

Justice, in the form of tens, twenties and fifty pound notes. If you’d like to find out how much of the compensation pot you can claim, use this free PPI calculator. Just enter a few details about your loan and repayments and you’ll receive a ballpark figure of what you’re owed, then if you’re happy – you can start your claim!

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