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CREDIT CARDS 101 ✨ 💳 ✨ Credit cards are amazing financial tools when you use them correctly! Here are some must-knows for credit cards and how you can use them responsibly in your day to day life Threaded below 🧵On twitter.com
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First up, what is a credit card? It's a card that allows you to buy things without needing to pay for them right away (good for emergencies) 🛍️ Your credit card provider pays for these things and sends you a bill (usually) once a month so you can pay back the amount borrowedPermalink On twitter.com
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Credit cards are issued by banks & other financial institutions They offer a reusable credit line - meaning you can borrow on them again once you've paid back the amount you borrowed before They also have credit limits - The total amount you can spend on them at oncePermalink On twitter.com
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The amount you spend on your credit card is called your 'balance' It's the amount you owe the credit card provider E.g - I spend £10 at McDonald's and pay with my credit card, my balance is now £10 🍔🍟 I now need to pay back £10 to the credit card provider laterPermalink On twitter.com
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You have a certain period of time to pay back the balance without paying any interest - usually, it's between 20 to 56 days 📆 You can pay off the balance in full automatically by setting up a direct debit to do this each month (recommended) or...Permalink On twitter.com
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You can pay it back in smaller amounts but you'll also have to pay some interest as well 💸 The minimum monthly payment is the least you can pay per month If you don't pay this you might have to pay additional fees & this could ruin your credit score so be carefulPermalink On twitter.com
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Additionally, you can also manually pay your credit card bill early 🏃♂️💨 You might do this because you need to free up some of your limit for a larger purchase or if you wanted to proactively stay on top of your credit card bill There's no penalty or charge for doing thisPermalink On twitter.com
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You can 100% use credit cards without paying a penny in fees ✨ My best advice for credit cards is to use them like debit cards and only spend money that you currently have This way you avoid overspending and are to pay back your balance on time 👌Permalink On twitter.com
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A tip for people who budget using @monzo ❗ You can set up the direct debit for your credit card to be paid from a pot 🍯 When you use your credit card, just move the same amount of money you spent into that pot so you don't miss any payments and always pay your card in fullPermalink On twitter.com
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So why use a credit card? 1️⃣ Section 75: purchases over £100 to £30,000 are given additional legal protection when paid via a credit card This means your creditor (the credit card provider) is equally liable with the merchant if something goes wrong with your purchasePermalink On twitter.com
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This is great for goods & services like electronics, flights, and even cars 🚙💨 Example You buy scuba lessons for £150 & the company goes bust 🤿 You'd get a full refund via your credit card Just make sure you pay at least £1 of the purchase on your credit card to be coveredPermalink On twitter.com
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Some 'need to knows' about section 75 🚨 The value of the goods/service needs to be worth at least £100 to be covered, so buying 34 £3 meal deals (£102) in one transaction wouldn't mean your sandwiches are covered under section 75 protection I'm afraid ❌ 🥪 ❌Permalink On twitter.com
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Another example I bought some furniture (worth £1,500) 2 years ago, paid the deposit (£50) on my credit card and paid the rest off via a 0% instalment plan Because I paid £50 via credit card & the item was worth more than £100, my purchase was covered under section 75 ✅Permalink On twitter.com
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You also need a direct link between the creditor and the merchant! If you paid via a third party like PayPal or a travel agent rather than directly, then you wouldn't be covered by section 75 😱 I try to pay all purchases over £100 directly (or partly) from a credit card 👍Permalink On twitter.com
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It doesn't apply to items that have a valid warranty You'd need to speak to the supplier/company first before you can speak to your creditor If you don't get far with the supplier/company, you can then take it up with your creditorPermalink On twitter.com
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2️⃣ Rewards: some credit cards let you earn cashback, Airmiles or other points when you use them (My favourite perk!) My to-go credit card is usually an American Express card I wrote about reward credit cards & how I make the best out of them here 🔗 buttondown.email/akashandmoney/archive/credit-card-connoisseurPermalink On twitter.com
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3️⃣ Improve your credit score: better scores can lead to better deals (although it isn't the only thing considered) such as: • Getting lower interest rates (e.g. on a mortgage or a loan) • Giving you access to better credit cards • And making you look less risky to creditorsPermalink On twitter.com
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How to boost your credit score using a credit card: • Use a small portion of your credit card limit a month (referred to as 'low utilisation') • Always pay your bill on time (set up a direct debit for this) • Build a payment history (shows lenders you are reliable)Permalink On twitter.com
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I've had a credit card from the age of 18, used it from time to time for small purchases and always paid it off in full and now I have a great/above-average credit score across all three credit agencies (Experian, Equifax & TransUnion) in the UK 🚀 @akashgoswami_/1389497121422946304Permalink On twitter.com
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"With great power comes great responsibility" You should apply this way of thinking to how you use credit cards Don't: • Overspend or miss payments • Pay fees/interest • Use your entire credit limit I have friends that learnt this the hard way 😔Permalink On twitter.com
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So to recap 🧢 • Use credit cards responsibly 💛 • Pay your card in full every month 📆 • Get additional protection on items over £100 🛡 • Earn rewards when you spend using a credit card 🎁 • Credit cards can help improve your credit score (if used correctly) 🏗️Permalink On twitter.com
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I cover other personal finance topics in my newsletter @akashandmoney Subscribe to get those sent directly to your inbox 📬 Like this thread? 1. Retweet the 1st tweet above 2. Follow me @akashgoswami_ 3. Check out the other threads on credit cards I've written below 👇Permalink On twitter.com
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My thread on credit builder credit cards 🛠️ @akashgoswami_/1399695989728964610Permalink On twitter.com
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My thread on 0% credit cards 👌 @akashgoswami_/1400073471124639744Permalink On twitter.com
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My thread on rewards credit cards 🤑 @akashgoswami_/1400433343460626432Permalink On twitter.com
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You can read the unrolled version of this thread here: typefully.app/u/akashgoswami_/t/QbWPQRS7YonbPermalink On twitter.com
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