by Gordon Hamilton

Created on: June 21, 2009

Considering how to maximise credit card incentives while minimizing debt does not present us with a particularly difficult set of procedures; however it may very well serve to place significant temptation in our path. It is vital that we establish precisely how we are going to achieve this goal before setting out to achieve it and never lose sight of what we are doing and where we intend going.

The credit card industry has been hit, just like any other, by the worldwide economic slump. This means that credit card providers are fighting with one another in order to attract new customers like never before. They are offering deals for switchers which often sound too good to be true. What the switcher in particular has to be aware of, however, is that without exercising all due caution, they may well find that these deals are too good to be true.

The most common incentive which a credit card provider will offer is a zero percent rate of interest on balance transfers from other cards for a fixed period of time. This is of course fantastic news for anyone paying an exorbitant rate of interest on another card but it is imperative that they examine the small print of this switcher deal prior to making the move.

The sincere likelihood in this instance is that although the interest rate charged on the balance switched to the new card will indeed be zero for the stipulated period, the likelihood is that the interest rate on such as purchases will not. Where it is, all good and well, but the sting in the tail here can be that every time the credit card holder makes a payment to their new card, the payment will be used one hundred percent to reduce the zero percent interest debt. This means that if they use the new card as they did the old, they will be accruing what may very well be an even higher rate of interest on all new purchases.

There are two principal ways to avoid this. The first is the obvious one in that we stop using credit cards altogether. This may not be possible, however, so it may prove more viable to keep the original credit card for everyday use. This will keep interest charges to a minimum and hopefully allow the core debt to be more quickly reduced.

The second major type of credit card incentive is where such as cashback or points are awarded every time the card is used. For anyone who has the luxury of having no outstanding credit card debt, this is easily maximised simply by ensuring that they pay the debt off in full each month to avoid all interest charges. If some debt is accruing, their still remains the possibility that the points or cashback will go at least some way to offsetting the interest charged.

How to maximise credit card incentives while minimising debt is therefore more than anything else about reading the small print, considering carefully how it affects us and maintaining a tight rein on our credit card spending at all times.

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