Your Risk Appetite Score


Using Cards in a safer way in Sri Lanka by

It’s easy for credit and store cards to become a habitual way of paying, as they allow you to buy things you want, even if you don’t have the money at the time. But the danger is the more you put off to pay later, the more it will build up, and before you know it, your debt has become a big problem. We’ve put together some top tips and guidance to help you understand more about these cards, when to use them and what effect they can have on your financial reputation, or credit score.
>Don’t think of credit as cash, or a substitute for cash – it’s easy to think of cards as an extension to your bank balance - breaking this cycle of thought is crucial to staying in control.
>Keep your credit clean – credit is used for more than cards, you need it for buying a house, getting a mobile phone contract, signing up with utility providers and more. Every time you apply for credit and the bigger the balance you have on credit and store cards, the more your credit rating, which is like your financial reliability score, will be affected.
>A good credit score isn’t gained overnight – it’s important to look after your credit score, so that when you really need it, you can access the financial products you need. Late payments, excessive applications for credit and high debts will all impact negatively, and take at least 6 months to clear.
>Not all cards are the same – interest, or APR rates vary enormously, some cards offer an introductory rate that will rise dramatically at the end of the offer period. Some charge an annual fee, some don’t. So it pays to do your research before you apply.
>People who provide credit share information – every time you apply for credit or are late making a payment and incur charges or are refused credit, this is stored on your credit file. So any potential lender can access this information when considering you for credit.
>You can access your credit file to monitor its health – if you want to see what’s on your credit file, as a means to better financial planning or because you have been refused credit, you can request a copy of your file from a credit reference agency.
>You don’t have to use your entire credit limit – having more than one card that’s maxed out, or close to it, will leave you no buffer for emergencies and can affect your credit rating. If your credit card company gives you a limit that’s more than you need or want, or if they increase it without you requesting it, you can write to them and ask them to lower it. This is a good way to avoid the temptation to spend.
Store cards

Store cards tend to be something that we agree to on impulse when shopping, and most often because there's an extra discount on whatever you buy if you take one out. They work in the same way as a credit card, but only allow you to purchase goods from that store or chain. And while they may seem like a convenient way to pay for something you really want but don't have the money for, it's probably about the most expensive, despite the introductory discount, unless you pay it off straight away. Store cards tend to have very high rates of interest or APR, sometimes double the rate of a credit card.

At a glance:
>Allows you to spread the cost of a purchase
>High rates of interest if you only pay the minimum
>Only valid for the store or chain you hold the account with
Debit cards

A debit, or cash card allows you to pay for things in shops or online, to pay bills, and to withdraw money directly from a bank account using a cash machine. Unlike a credit or store card, it only lets you pay for things that you can actually afford. Most banks set a limit as to the amount of cash you can withdraw each day from a hole in the wall machine. But there's no limit as to how many times you can use it to pay for things each day, as long as you have the money in your account.

At a glance:
>Normally no interest as it's a direct payment from your current account – unless you are using an overdraft facility
>Accepted in many countries
>Allows you to withdraw cash from ATMs all over the world
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