Tag: credit card debt

4 Benefits of Using Your Credit Card Sensibly

Written by Alex Swindells on October 13, 2022. Posted in Debt help.

Credit cards are common in our society, and many people use them to pay for a large range of things, from the weekly grocery shop to washing machines and other household appliances. But just because we know about them, it doesn’t mean we know about the benefits that come with them.

If you know how to use a credit card wisely, there are an array of advantages that they can bring you and your credit score.

Here are 4 benefits of using your credit card sensibly.

Benefits of a credit card

1) A credit card can build your credit rating

The amount you can borrow from Lenders, and the associated interest rates depends on your credit rating.

A credit rating is what banks and other lenders use to establish the risk of lending you money. The rating is typically a three-digit number based on your credit report. The credit report is a record of how you’ve maintained bills and paid off debts in the past. The higher the number of your credit score, the better the credit rating. Different credit reference agencies have their own scales when it comes to establishing credit ratings, so yours might look different depending on who you use.

Your credit card account and payment history form a significant part of your credit report. This means that using your credit card responsibly and paying it off regularly can improve your credit rating.

Better credit ratings can make it more likely that you can access lower rate, or higher value lending, such as a mortgage. They can also increase your chances of getting better deals on things like mobile phone contracts.

There are different ways of improving your credit score, but they can all help you with bigger purchases later on, including car loans.

2) Credit cards can give you extra security

When paying for things online, there is always the risk that the items you order won’t be what you expected, if they arrive at all. This is where a credit card can help.

By paying for online purchases through your credit card, you can have extra protection concerning those products or services. If you are unhappy with the service or product you have received, you can request a chargeback through your credit card company. This is because of Section 75 of the Consumer Credit Act 1974, which means you can request a chargeback for numerous reasons, including if the merchant has closed down or if the product doesn’t arrive to name a few. It doesn’t apply to debit cards.

For Section 75 of the Consumer Credit Act 1974 to be in effect, the purchase must be over £100 but under £30,000. However, you don’t need to have paid the full amount on your credit card.

This extra protection can also apply to booking holidays, such as in some hotels and airlines.

3) Credit Rewards

Using your credit card isn’t just about credit ratings and protecting your purchases, although they can be useful. You can get rewards by using it too.

Several credit card companies offer rewards to whoever owns the credit card when an eligible purchase has been made. By buying the likes of groceries and petrol on your credit card, you can gain credit card rewards through points for every pound spent.

Different credit cards can have different rewards available, with some offering cashback on items and others offering air miles. Reward points to be spent elsewhere, such as in restaurants or shops, could be another reward available for some credit cards.

For example, credit cards that offer air miles can be popular with people who have to travel frequently as they can offer discounts on flights. This can potentially apply to other elements of travel such as hotel costs too.

If your credit card offers cashback, it should be noted that some companies need you to log in to your account and have your settings allowing you to receive said cashback.

4) Responsibly using your credit card can increase your spending power

When using your debit card, you are limited to the amount of money you have in your current account, regardless of your situation or extenuating circumstances. With a credit card, you no longer have this issue.

By using your credit card responsibly, you can increase the amount of credit you have available to spend. This is particularly useful when an important purchase has to be made, or something immediately needs replacing, especially if it is an expensive item. Sometimes you just don’t have enough savings in your current account to cover unforeseen circumstances, and that’s where a credit card comes in. In the cases of those unpredictable emergencies, they can act as a safety feature so your life can continue, and you can pay off the money in manageable instalments later.

As well as increasing your spending power, using your credit card responsibly for a bigger purchase can also mean there are more rewards for you to gain on your credit card account, whether that be through cashback, points or air miles.

Remember, any credit borrowed from your credit card must be repaid.

Do you need help with credit card debt?

In January 2022, the average UK household’s credit card debt was £2100, which may increase as the cost of living rises.

There are various ways in which Swift Debt Help can aid you with your credit card debt, including offering advice to those who need it. Whether you need help to organise affordable payments, legal advice or just someone to talk to, we are here to help you get control of your credit card debt.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Close up portrait of a man in debt showing empty wallet

The 5 Stage Process of Dealing With Debt

Written by Alex Swindells on September 1, 2022. Posted in Debt help.

People with debt problems often hide their situation because they are ashamed. But the reality is, that it is more common than we realise. In February 2022, the average adult in the UK owed £33.410 in total debt.

Mounting debts create a huge amount of stress and we all have coping mechanisms to deal with this. We have identified 5 stages many people might go through as debt begins to spiral out of control. Consider if these ring true for you, and if so, understanding where you are in the process could make it easier to intervene and take action to resolve your problems.

1. Denial

Debt is incredibly common and most people use credit in some form. Borrowing an affordable amount on a credit card and paying it off right away can benefit you. But when your debts get out of control, it’s important that you address the problem right away. Unfortunately, the first stage of dealing with debt is usually denial.

Even though the payments are out of control, people tell themselves that they are borrowing responsibly and they will easily be able to get back on track next month. Their spending habits don’t change, so they still make a lot of luxury purchases and don’t save money or pay their debt.

Emergency spending is also common in people that are in denial about debt because they fail to plan for the future. When all of your money goes into credit card payments and you don’t have any emergency savings, an unexpected payment pushes you further into debt.

A large proportion of people in debt denial will overspend and build up large credit card debts. Ultimately, this means that the situation gets worse every month and people in denial tend to avoid looking at their bank balance or credit card statements because they are afraid of the outcome.

2. Panic

Tired teen girl feeling dizzy, having panic attack and massaging her temple.

Denial can only last so long before you are forced to face your debt problems. Interest payments will increase on unpaid debts and the situation will snowball. Missed payments and unpaid bills start piling up and creditors will send letters and call you on the phone, demanding payment. Eventually, collection agents may start coming to the house too, so it is impossible to avoid the situation. This is when panic sets in. Once people realise that they are in a serious debt situation and they don’t know how to deal with it, they usually react in one of two ways; some people accept that they are out of their depth and seek help with their problems. However, some people try to manage the problem alone and move into stage 3.

3. Self-Determination

Successful businesswoman working hard on laptop computer in her office dressed up in white clothes.

Sometimes, people believe they can fix the problem themselves or are too proud to ask for help. Depending on the severity of the problem, some people can make positive changes to resolve their situation themselves and get back in control. But often, small changes to habits or using money-saving tricks only make a tiny dent in the large debts. Even getting a second job and making big cutbacks on spending can fail to solve the problem, especially if it has been ignored for so long.

Although people can buy themselves a bit of time, serious debt problems cannot always be dealt with on your own. In many cases, it is too late for budgeting and you need to consider formal debt solutions. It is a good idea to have a realistic look at your situation and what you can practically achieve to help. For some people, it might be best to skip the self-determination stage and seek professional advice as soon as they recognise the problem, rather than delaying the inevitable.

4. Frustration

Frustrated woman with head and glasses in hands. Laptop open in front of her with paperwork on the desk.

Eventually, people get to a stage where they have tried everything and their debts are still increasing every month. At this point, the frustration begins and the debt problem starts impacting other areas of their life. Relationship problems are very common because people hide the scale of the debt. When they recognise that they cannot fix the problem and they need to admit how bad the situation is, this can lead to family tensions. People also try to shield friends and family from the situation, so they will isolate themselves.

Realising that they have tried everything and nothing has worked also creates a feeling of helplessness. This, coupled with the sheer stress of the situation, can lead to mental health issues like anxiety and depression.

If you do find yourself in this position, you can fill out a ‘debt and mental health evidence form’ and send it to your creditors. This gives them your consent to access information from your doctor about your mental health, so they are aware of the impact that debt is having on you. Many creditors will take this into account when contacting you about payments or negotiating a payment plan with you.

5. Acceptance

Acceptance is the end of the debt cycle. After trying everything else and seeing the impact that it is having on their lives, people finally accept that they need help dealing with their debt issues. When people eventually reach acceptance, they seek the advice of a debt solution company like Swift Debt Help.

If you have debts with multiple creditors and you are unable to pay, an Individual Voluntary Arrangement may be the right option. This allows you to write off a portion of the debt and consolidate all of your different debts into one manageable payment. It also stops creditors from chasing you, so you can take the pressure off and focus on repaying the debts.

Being trapped in a cycle of debt can feel hopeless and you might experience all of these stages, but help is out there. At Swift Debt Help, we can give you advice about different debt solutions and support you through the process. There are processes you can enrol in before you get to the debt recovery solutions stage, so you can protect your financial future,

If you are looking for a way to solve your debt issues, our excellent solution finder tool can help you find the right processes for you. Alternatively, get in touch directly and our expert team can give you all of the advice you need.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.