Practical tips to help you improve your credit rating and avoid expensive high interest loans
Are you one of the ever-growing number of people in the UK who find juggling their finances difficult?
Below we have identified 4 ways which these cards can be used to help you control your spending habits.
With a debit or credit card, you have to be very careful with spending. These cards do not stop you exceeding your limit and are happy to charge you if you do. With a prepaid card, this does not happen and can only spend what you have.
You cannot go overdrawn so you do not have to worry about racking up charges and fees.
To see what may happen if you exceed your limit with a standard card, please click here.
Transaction fees are typically regarding as being a bad thing and often with good reason. However, is it possible to turn this charge into something positive? If you knew that you would be charged a transaction fee each time you used your card, would you use it quite so often?
It is all too easy to turn to credit to make unnecessary purchases. This would not happen as often if you had to pay a fee each time you use your card. Since many prepaid cards charge for each transaction, the chances of making frivolous purchases will be greatly reduced for many people.
This recent article in the Guardian explores avoiding additional charges. Please click here for more.
‘Binge drinking’ regularly makes its way into the newspaper headlines however this is not the only sort of ‘binge’ that is now commonplace.
Easy access to borrowed funds makes it easier than ever for people to go on a shopping ‘binge’ or spree, using money which is not theirs.
By only spending money which has already been credited to your card, that chances of going out on a shopping spree which you cannot afford are greatly reduced.
‘Binge Shopping’ is always known as compulsive buying disorder and can be potentially serious.
If all of your money is stored in one account, it can often be much easier to overspend and then when the time comes to pay bills etc, the shortfall can often be very difficult to overcome.
Having separate accounts, i.e. one for saving, one for bills and one for spending can often make it much easier to budget. By attaching your card to the one for spending and then transferring a regular amount onto the card each month, you will quickly and easily be able to identify exactly how much money you have to spend without worrying about leaving yourself short in other areas.
For additional tips about budgeting please check out the following Investopedia article dedicated to the basics of budgeting – https://www.investopedia.com/university/budgeting/basics2.asp
If you’ve had financial problems in the past, there is every chance that you will find getting a new loan or credit card very difficult. A specific type of prepaid card called a ‘credit builder prepaid card’ can play a role in helping to rebuild your credit rating to open up better deals for you in the future.
Like other prepaid cards, credit builder prepaid cards have been created to allow you to credit them with cash whenever you choose and then use them as you would any other card, typically in return for a small monthly fee.
Once you have made a payment to the card, the card company will then report this to credit reference agencies, and your credit history will be updated. This can help to make an improvement to your rating within just a few months.
For more information about one of these cards, please click here.
For more on prepaid cards and how they work, please take a moment to visit the dedicated Which? guide – http://www.which.co.uk/money/credit-cards-and-loans/guides/prepaid-cards/
This Money Saving Expert video may also prove to be very useful:
Whilst pre-paid cards can greatly help you get on top of your finances, there are times when getting a loan is still necessary.