If you are about to enter a temporary period of financial strain, putting purchases on your credit card could prove a short term solution, providing that you have a card that charges a reasonably low interest rate. Taking that action is certainly not a recommended long-term strategy, but for relatively short periods where you suddenly have a lot more outgoings than usual but your income remains constant then resorting to a period of temporary borrowing on your credit card is a feasible solution.
Before you resort to that method of short-term financing make sure that you possess a low interest credit card, or preferably can take advantage of a 0% balance transfer. Even though the Bank of England base rate is at a historical low some credit card issuers are charging interest rates in excess of 30% APR. Obviously, even short term lending at those rates will prove very expensive and should be avoided at all costs.
However, there are plenty of credit cards that charge much more reasonable rates, around 10 – 17% APR; cheaper than many high street banks overdraft rates. Some cards even offer low interest rates and a 0% balance transfer option for a limited period, typically six to 12 months. So, if your financial squeeze is only a short term blip, then using this type of card could prove a lifeline.
As always, shop around before committing to signing on the dotted line, and make sure the card you sign up for, or already possess, is the best of the low interest credit cards.
Some affinity cards may also offer permanently low interest rates, of course that are subject to change if the base rate increases. Indeed, the latest trend for London-based credit card holders is to use one that also offers contactless payment technology tied into Transport for London (TFL). Holders merely swipe their card at Underground entrances and exits as it also doubles as an Oyster Card; providing a convenient way to pay for travel and also purchases under £10 at participating outlets.
However, the priority for those seeking short term financing on plastic is to get or use a card with the lowest possible rate, so don’t be tempted by cards offering reward schemes, such as points or air miles. The chances are that their interest rates will be higher in order to help offset the cost of the rewards scheme. Instead, opt for a no-frills, low interest rate card and you will repay your debt a lot quicker.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.