The Best Ways to Use Credit Cards

Credit Cards 2Credit cards can be a troublesome debt like any other if allowed to get out of control, but used properly they can be a useful financial tool. They can help you spread the cost of purchases, cover emergency spending or simply buy essentials when you don’t have cash to hand.

Some of the best ways in which credit cards can be used wisely and result in a real financial benefit include:


If you have little credit history or are trying to recover from a bad rating, credit cards are ideal. When you go shopping, simply use your credit card to pay for something that you could have paid for in cash. Then, use the cash to pay off the card before any interest starts to build up. In terms of your credit history, you have repeatedly borrowed money and proceeded to pay it back very promptly and in full. This looks good to future lenders, and helps you build and strengthen your credit rating –all in a much more safe and affordable way than other kinds of borrowing entail. If your credit rating is bad, you can probably still qualify for a card but interest will be high so take extra care to pay off quickly.

Spreading Big Costs

A 0% card can be used for spreading bigger costs such as car insurance, up-front yearly line rental payments, and even purchases of second hand cars from dealerships. All of these examples represent things that are cheaper if paid up-front, but potentially more manageable when paid in monthly instalments. The monthly instalments are essentially credit deals from the provider or seller, and more expensive because interest is incorporated into monthly repayments. If you can access a credit card offering a better rate – preferably 0% – then you could make the purchase up-front with that card in order to access the cheaper price. Then, to clear the debt on the card, repay monthly over the same period in which instalments would have been due but at a lower rate.

Making Ends Meet

Credit cards are relatively expensive forms of borrowing. However, if you get in a tough situation where you really need to make ends meet while you wait for payday, they are an infinitely better choice than the payday loans which are marketed to people in exactly this situation. Even the most absurdly expensive credit cards make the interest rates of payday loans look reasonable. However, you should still be careful to ensure that it really is just a matter of tiding you over until payday or generally  a short-term matter that you will be able to pay back before it becomes a problem. Credit cards may be a lot better than payday loans if things do go wrong, but you should still approach borrowing in financial difficulty with great care.

Three Steps to Cheaper Borrowing

CashBorrowing money, when approached carefully, can be a useful way to get access to money you need but currently don’t have to hand. The downside, of course, is that you will pay interest and ultimately repay more than you borrow.

Naturally, when borrowing you will want to keep the interest as low as possible and generally minimise the amount you repay. Three simple steps can do a lot to help make your loan as cheap as possible.

Shop Around

Shopping around is arguably more important today than it has ever been. This is true of many products, and loans are among them. Countless providers in fierce competition introduce a vast array of deals, and the internet makes comparing those deals quicker and easier than ever. Don’t just head to one lender – even one you’ve been reliably told has reasonable rates – and accept what they offer you. Make sure to look at comparable loans elsewhere to locate the best rates. Make sure you understand the costs in full, though. Are there any charges besides interest, such as early repayment charges if you shift your debt early?

As well as checking out different providers, it is well worth checking out different types of finance. It is surprising how far some types of credit overlap and how different their charges could be. To take an extreme example, if you have a reasonably good credit score and only want to borrow a few hundred pounds for a short time, there is no point resorting to high-interest and risky payday loans (which are rarely if ever advisable) when you might be able to take out a credit card with 0% on purchases and a sufficient spending limit.

Borrow More

This one seems counterintuitive, and only works in quite specific circumstances, but it is definitely worth checking before you take out your loan. Loan providers usually offer better rates for bigger loans, and there are very distinct cut-off points between the different rates. If the amount you want to borrow is close to the threshold, then borrowing a little more could result in a lower rate that ultimately saves you money.

For instance, a good but attainable interest rate for a £2750 loan over five years at present would be around 15%. Boost your borrowing to £3000, and with a little luck and a fair credit history you could get under 8%. The latter will see you pay back under £3650, compared to just over £3925 with the former. In other words, borrowing £250 more will see you pay back nearly £300 less in total.

Repay Early

Once you have your loan, the best way to keep the interest down is simply to repay early. You should do this if at all possible, as the difference can be very significant (though beware of any early repayment penalties that could offset some of the benefits).

Pay above the minimum each month if you can in order to shift your debt early. Aside from some money “for a rainy day” it is better to put money towards your debt than into a savings account due to the disparity in interest rates, so while you may not like parting with extra money in the short term you will be better off once the loan has been cleared.

Building an Effective Financial Buffer

A financial buffer is a sum of money you have put by “for a rainy day.” In other words, it is money you have to ensure that any sudden or unexpected problems will not leave you struggling financially. Examples of the kind of disaster that your financial buffer can protect against include repairing or replacing your car after a breakdown or expensive work that needs to be carried out on your home.

Building up an effective financial buffer that will be enough to protect you from all manner of disasters can seem difficult when finances are already tight. However, a few steps can help you put together the best buffer possible.

Gathering Funds

Even if your finances are tight, it is a good idea to put what you can aside to form a financial buffer. Otherwise, if any unexpected expenses do arrive, you could find yourself in a very difficult situation. If you don’t have much to spare, it is a good idea to build up your buffer slowly through regular contributions. Work out what you can spare each month, and put this into your bank account to form part of your buffer. Ideally, this should be a fixed regular amount. However, if your income is variable you may have to work out just how much you are able to put aside on a month-by-month basis.

The Role of Debt

Usually, it is not a good idea to build up any savings while you are in debt. The amount you gain from savings will be outweighed by the amount you lose from accruing interest on your debt. However, financial buffers form the exception to this rule. It is a good idea to put a little aside if you can just in case of an emergency rather than putting every penny towards your debt. However, do not forget that meeting at least your minimum repayments takes priority if you find yourself in the unfortunate situation of having to choose.

Where to put It

If you are lucky, you will not need your financial buffer for any emergencies and it will end up just being savings for the future. However, it is different from other kinds of saving. You may need to access it at short notice, so as tempting as it can be to boost your buffer with high interest rates you should not tie it up in any account that makes access difficult. Place it into an easy access savings account with online banking so you can near-instantly return it to your current account if needed. Alternatively, consider putting it into a high-interest current account if you can meet the conditions. This will make it readily accessible on your debit card, and may give better interest than easy-access savings accounts.

Making a New Car More Affordable

Car PurchaseThere are a number of reasons you need a new car. Maybe it is your first car, or maybe you are upgrading to something that better suits your needs. You may simply fancy a change, or your trusty old warhorse may have finally given up the ghost and would cost more to repair than to replace. Whatever the case, a new car can be an expensive purchase. However, there are a number of ways you can make it more manageable.

Look Around

If you can afford to take your time, then shop around for the best deal. If you need the car urgently, then at least check out multiple garages and, assuming you are looking at second hand vehicles, private sellers. Not only will this let you get the best deal in terms of financial outlay, but could potentially mean you get a better car for your money which could be hugely beneficial in the long run.

Consider All Finance Options

If you need to buy a car on finance, don’t just accept the dealer’s finance options. There are multiple alternatives out there when it comes to financing your new car purchase. Third party car loan providers, or personal loans not specially designed for cars, may offer better rates. This may also make it possible to effectively buy a car from a private seller on finance, borrowing the money from your chosen lender and repaying it monthly as you would a dealer’s finance deal. However, it is true that dealer finance is sometimes more accessible.

Think About Fuel Economy

A car isn’t just a one-off cost but an ongoing one. Fuel economy will have a major impact on how much it costs to keep it on the road. Getting a car that gets more miles to the gallon could easily counteract a slightly higher initial price tag. Diesel cars offer better fuel economy than petrol ones, even when the higher cost of diesel fuel is considered, but cost more to buy when new. As such you will only benefit if you use the car a lot. When buying a used car, the price gap between petrol and diesel tends to be smaller so a diesel is more likely to be beneficial.


When you buy a new car, you will naturally be taking out a new insurance policy. Use comparison sites to find the best deal, and consider using a cashback website to bring the effective cost down. Cars can differ significantly in insurance costs, so if you are looking at more than one vehicle get some quotes online before making your choice. This will allow you to consider insurance cost differences when making your decision and potentially save money.

Is P2P a Good way to Borrow?

Peer-to-peer lending (P2P) has got a lot of attention recently and a number of headlines in the news. However, this has been driven by the announcement of plans to allow P2P loans to be placed into ISAs for tax-free returns, so most of the media coverage has focussed on the point of view of the lender. But what about taking out a peer-to-peer loan? Is the prospect as attractive for borrowers as it can be for lenders?

Who can Take out P2P Loans?

The question of who exactly is eligible to apply for a peer-to-peer loan depends very much on the provider. Some only cater to small businesses, while others also provide loans for individuals. They also have varying acceptance criteria. For example, some will only accept individuals with a very strong credit rating, while others will accept those who don’t have quite such a stellar history (albeit requiring higher rates to compensate their investors for the higher level of risk). If you don’t think you are eligible for one provider, don’t let that stop you looking for another that seems more appropriate.

Note, however, that most P2P loan providers require at least a fairly good credit history. You will also probably have to pass the lender’s own credit tests as well as being subjected to a traditional credit check through a third party credit referencing agency.

Advantages of P2P Loans

One of the advantages of taking out a P2P loan is that they tend to be more affordable.  P2P providers cut out many of the “middleman” activities that are present when taking out loans from banks and traditional lenders and they do not have the same expenses as other types of loan provider. As such, the rates they charge tend to be noticeably lower than you would get from other sources, especially if you are taking out a loan relatively short-term.

You may also have a better chance of successfully obtaining a loan, or of borrowing the full amount you require, from P2P lenders. There are several reasons for this. One is that, if your credit history is imperfect, you may be able to find investors who are willing to take on a small amount of extra risk for higher returns. The fact that the interest rate is also generally lower than when borrowing through a traditional bank somewhat lowers the chances you will struggle to repay, which could potentially help your case. On top of this, P2P lending offers greater flexibility as the funds for your loan could come from multiple people. If nobody is willing to lend you £10,000, there might be four people willing to contribute £2,500.

Choosing Your First Credit Card

Credit CardsUsed properly, credit cards can be a useful way to give yourself added financial freedom, cover large expenses, or plug the gap between an expense and your next wage payment without the need to resort to costly payday loans. They can also be a way for those with little or no credit history to build up their credit rating in a relatively simple and cost-effective way. However, if you have never had a credit card before it can be difficult to know which one to choose. The following are all things you may wish to consider in choosing your first card.

Specialist Credit Builder Cards

This type of card is well worth considering as a first credit card if you have little credit history. They are specifically designed for those with little or no past record as a borrower in order to build up a credit history and create a good rating. In other words, they are specifically aimed at those taking out a card for the first time. This means you have the best chance of getting accepted despite your lack of history, and are likely to receive a fairly good package for somebody who is, in the eyes of the lenders, an unknown quantity.

However, do not make the mistake of thinking that you will automatically fail to qualify for anything but a card that is specially designed for someone in your situation. It is still worth seeing whether you might be eligible for another card with slightly better terms, especially if you do have a little credit history with no particular bad marks. Be aware, though, that a declined application could form a bad point on your history. Some providers offer tools to help you check your eligibility without endangering your credit rating.

Cashback, Rewards and Incentives

Many cards offer incentives and rewards. These might take the form of cashback on purchases or a one-off gift upon taking out the card such as money, a gift voucher, or some desirable item. It can also be possible to obtain rewards for taking out a card from third parties. For example, it is possible to apply to many providers through cashback websites, earning cashback upon the approval of your application for a credit card. Be sure to look at rewards when shopping around. If two providers offer very similar packages but one offers a reward and the other doesn’t – or if one reward is simply more attractive than the other – it will probably seem like a no-brainer which one you choose.

The only thing to beware is letting an attractive reward tempt you towards a card that is otherwise not as good. This can sometimes be worthwhile, but you should be very sure that the reward will outweigh the drawbacks before you make this decision. There is no point accepting a cash reward or gift voucher, for example, if its value is likely to be wiped out by higher interest rates and charges.

The New ISAs

There are some significant changes that have happened with the Individual Savings Accounts (ISA) recently. The known ISAs are becoming New ISAs, or NISAs.


The changes

Every person in the UK who is 16 years old or over has an annual tax-free ISA allowance which can be held in cash, stocks and shares, or a combination. This allowance has now increased from a maximum of £11,880 to £15,000. Furthermore, the rules before said that you cannot have more than half of your ISA allowance in cash (which meant £5,940), while now you have the right to have the whole lot in cash if you want so.

What is more, the new rules expand the array of things you can do with your money. Previously it was not possible to transfer past stocks and shares ISAs into cash but you could only transfer past cash ISAs into stocks and shares. Now according to the new rules you are allowed to move your ISA money either way.

So in order to choose what to do with your ISA, you have several ways you can go. For example, if you want to save into a cash ISA, you have four options to choose from.

Easy access ISAs allow to withdraw your money whenever you want without any penalties. Usually these have different interest rates which can either go up or down. Some of them even come together with an introductory bonus that usually lasts for a year. The lowest interest rates usually go with these ISAs. If you give a sufficient notice, you can withdraw your money with a notice ISA and thus, you can get a slightly better rate. Also, there are regular saver ISAs which offer you better rather, however only for a year. There is a maximum amount you can save each month which is equivalent to a twelfth of your annual ISA allowance.

You can find the best rates offered by fixed rate ISAs. The deal with this kind of ISAs is that you lock your money away for a certain period of time and if you access it early you are going to be penalized with a loss of some or all of your interest.

When it comes to stocks and shares ISAs, you have a variety of investments to pick from, such as company shares, index tracker funds, managed funds and bonds.

Nevertheless, make sure you shop around for your ISA because there are many different platforms and stockbrokers.

Pension Reforms Introduced in Budget 2014

The Chancellor George Osborne introduced major changes to pension rule which mark which mark the biggest transformation to the taxation of pensions in almost a century. 

Pension rules are being eased and thus, it will be more stress-free for people to redeem smaller pension pots and will no longer be obliged to buy an annuity with their savings. These changes caused a serious fall in the share prices of the main pensions providers, reaching numbers like 8% to 13% down.


The Chancellor also initiated £20 million over the coming two years in order to develop a scheme providing advice with consumer groups and industry bodies. In other words what this means for people who are retiring is everyone who has a pension pot which could be used for purchasing an annuity will be eligible to receive a free and impartial face-to-face advice on the various options. This will also help people who are interested in buying an annuity to find the best possible deal for them.

Even though annuity rates have fallen by half over the last 15 years, most people still have little other options besides buying one. Some people thing that pension rules so far have shown a patronizing view that pensioners cannot be relied on with their own pension pots. Nevertheless, the Chancellor rejects this view and believes that hard-working people who have done the right thing all their lives need to be trusted with their own finances.

Most people who retire choose to buy an annuity with the money they have saved in their pension pot because this gives them a sense of security that they will have a fixed yearly income for the rest of their lives. However, in recent times there has been growing distrust with annuities because rates are falling and new deals are appearing all the time so sometimes staying with your existing pension provider might turn out non-beneficial.

However, the Government has announced that from this month people will be able to have a more flexible access to their savings.

Further changes include cuts in the amount of guaranteed income that  someone would need when he retires in order to access the so called flexible drawdown where you can draw off money from your pension pot. Currently, the sum has been £20, 000 per year while now after the changes it will be £12, 000 per year.

Therefore, Budget 2014 can be considered as bringing serious pension reforms.