The Amazon Mastercard is one card which is used by thousands of people to pay for everyday items liked dining out at restaurants, buying clothes and to pay for food. In some cases, people use it for bills payments. As credit cards are much easier to carry around than cash, they are safer and much easier to use, and these days, you will struggle to find places who don’t accept credit cards.
Emergencies happens and these can be very handy for these, such as paying a breakdown with your vehicle come out and tow your car to the nearest garage should your car break down in the middle of nowhere!
You should not just jump in head first to get an Amazon Mastercard, you should take some time to consider whether or this is card you really need, or perhaps there are better options available to you.
This article will provide you with more information on:
- The reasons why a credit card might be a viable option for you
- The benefits and downsides of getting a credit card
- Other options you might want to try, instead of a credit card
- Ways to manage your credit card effectively, and get the most out of it
About the Amazon Mastercard
The Amazon Mastercard gives qualifying customers up to £500 to spend instantly and earn reward points for purchases. There is no annual fee and it is available for UK residents only. Amazon is one of the largest retailers in the world and they have spent more than £18 billion in the UK economy over the last decade.
Why it may not be a good idea to get an Amazon Mastercard?
There are young people who decide to get a credit card to help get them through their studies, but the problem is that they already have a lot of debt with student loans, and this can put them in a more difficult debt situation.
It has been reported that the amount of student debt young people are in is worse than credit card debt owed by the working-age population.
When young people leave University or college, and start working, they need to pay back their student loan. If they also decide to take out a credit card, this can escalate their debt situation even further.
Managing your budget
You may be leaving education and look to start out your career, or you may just want a back up incase of emergencies. A credit card can be a good option for these purposes, but you also need to be careful.
It can be easy to forget that you still need to make payments to your credit card every month, and it can be easy to get carried away with purchases when you are not making upfront payments. This is how people end up in debt with credit cards.
It may seem like the Amazon Mastercard is a great way to pay for things, but it is much more sensible to have the cash before you start making purchases. However, if you can manage your credit card effectively, and you are good at managing your finances, this could be a good option.
The risks of credit cards
If you are not the best with money and there is the risk that you might overspend if you have access to a credit card, then getting the Amazon Mastercard may not be a good option. Some people are great with money, but the majority of people are tempted to spend more if they have a credit card. This can eventually lead to some serious financial debt.
If you are paying by cash for your purchases, you are less likely to overspend, than if you are paying for it in the future. In cases were you already have debt problems, it might be best to avoid credit cards, as these could lead to further issues.
Will your salary cover your credit card balance?
Credit cards can be a good way to build up your credit score, especially if you don’t have any credit score at the moment. If you can use your credit card efficiently, it can be a good tool to have. For instance, if you can clear off the balance each money, then it can work out well for you.
If you have earnings which allow you to pay off your balance each month, this can be worthwhile. It is important that your earnings are in line with the credit card bills. If your income is less than your credit card expenditure, you could end up in serious deep problems.
In cases were you only have part-time work, or a seasonal job, and you are not earning enough to pay off your credit card, or you are unemployed, this might not be a good idea. It is unlikely you will be able to clear off your balance each month.
Interest rates on Amazon Mastercard
The problem is that if you fail to pay off the Amazon Mastercard balance each month, you will end up paying more interest.
You might not be aware that you need to pay interest on your purchases, but this can arise if you don’t take care and manage your credit card properly.
The interest is basically wasted month. It means you are often spending a lot of time working, and this is only paying the interest on the credit card, rather than making any real dent on the balance.
You should consider whether getting a credit card will lead you to being charged interest as you are not able to afford the payments to clear off the balance. You need to consider whether it is really worth it?
The pros and cons of the Amazon Mastercard
There are many people who believe that a credit card is a necessity, rather than a luxury. Credit cards are widely recognised as a reflection of your financial situation. If you have a credit card, it can give you the flexibility to put down payments for purchases which may be out your reach if you had to save for them.
The Amazon Mastercard may be helpful to have in certain situations, but you should always take time to weigh up whether it is worth the risk and temptation, or is it better just to save your money, and buy when you can afford these purchases.
We have detailed some of the pros and cons of owning a credit card in more detail:
- Pro: The Amazon Mastercard can help you to build your credit: This is something it can do. If you manage your credit card properly, you can use it to purchase goods and services, and simply pay them off when the balance is due.
- Con: You may end up paying interest: If you are not in a position to clear off your Amazon Mastercard balance each month, the company will start to charge you interest on your payments. If you continuously forget to pay off the balance, you may find yourself in a difficult situation.
- Pro: You can rent a card: In some cases car rental companies will only accept a credit card, especially if you are going on holiday car rental overseas, you may be able to do exactly the same with a debit card.
- Con: You may forget to make payment: If you are on holiday, or otherwise engaged, you may completely forget that you need to take care of the balance on your Amazon Mastercard. If you fail to do this, you will carry the balance over, together with the additional interest. It can be easy to forget to make those vital payments.
- Pro: Credit cards are ideal for an emergency: There are always times when money is a bit tighter than usual. You may have an unexpected bill to pay, or you might have a repair you need to take care of. If you don’t have the cash readily available for life’s emergencies, the credit card can be a useful asset to have.
- Con: It may be a more expensive option: Rather than relying on credit cards for emergencies, it may be more cost effective to keep money saved up instead. If you put even a small amount away each money, you will soon have enough to help cover any potential emergencies you face. It can be much cheaper to do this, than to pay interest if you can’t pay off your credit card balance.
- Pro: Awards are available: There are other additional benefits from using a credit card, including reward points, discounts etc. This can be handy, especially if your credit card company can offer you rewards on a regular basis for the things you love.
- Con: There are potential risks: The allure of rewards can get the better of judgement sometimes. If you cannot afford to clear off your balance at the end of the month, the rewards go to waste. If you can ensure you clear off the balance, the rewards can be good but you should be aware of the risks.
Other points about reward cards
Credit card merchants are not silly, they know exactly what consumers want. They are well aware that by offering enticing rewards that people want, most people will be only too quick to snap them up. As such, they run up more money on their cards than they usually would, as they want to get those rewards
The credit merchants know the patterns of behaviour of consumers, and they are well aware that most people don’t pay off the balance of their credit cards each month. This allows the credit card company to make money through earning profits on the interest you receive on your outstanding balance. They can sit back, relax, and enjoy money for nothing!
In addition, the rewards are not quite as generous as you may think. They get good deals with the suppliers, so the rewards don’t end up costing as much as they may seem. The interest charges are higher than the cost of the rewards. This is why it is important to resist getting credit cards if it’s simply just to enjoy some tasty rewards.
How to ensure you don’t get into debt with your Amazon Mastercard
The best option for the Amazon Mastercard is to build up your credit, as this is how you will get access to loans and better credit rates, but you need to manage your credit card carefully for it to do what you want. Otherwise, you may end up negatively affecting your credit rating.
Your credit score is made up of a range of different factors, including your credit history, or even a lack of credit history. If you don’t use any credit, this can affect your credit score as much as being bad with your credit.
With a good credit score, you may be able to secure credit if you wish to buy a home or a new car, decorate your house or go on an expensive holiday abroad. However, in order to be able to get these benefits from your credit card, you must manage it effectively. This is not as easy as it may seem.
These are some rules and guidelines you may wish to follow to help you manage your credit card and to prevent you from getting into debt.
- One of the key aspects of managing your Amazon Mastercard effectively, is to keep the limit as low as you can. It can be tempting to keep increasing the credit card limit or just allowing the credit card company to give you a higher limit, but this can make it more tempting to overspend. If you have a lower limit, it means you have a lower balance, which makes it easier to keep on top of.
- It is better to stick to one credit card, than have several in your name. Not only is this difficult to manage, it may also be too tempting to overspend. It could also affect your credit score negatively. One is enough.
- Make sure you pay off the Amazon Mastercard each month. If you pay off the balance each month, on time, your credit history will start to build and your score will improve. This will reflect well for future lenders, as it shows you can manage your money effectively, and pay your bills on time. This is what lenders want to be assured of, before they agree to offer you credit.
- Resist the allure of free offers. There are often freebies that come with credit cards, much the same as you get with mobile phone contracts. You might be offered gadgets, free clothes or discounts on your favourite brands. You may be enticed to keep opening and closing credit cards just to get the freebies, but this can affect your credit score. Always ensure it is a good deal before you decide to sign up.
- Don’t be tempted to spend all the available credit you have on your Amazon Mastercard. Using up all your available credit, may negatively affect your credit score. Try to use up to 30% of your available credit, to maintain the card and to keep your credit rating high.
What are other options apart from Amazon Mastercard
After reading this, you may have reached the point where you have decided that a credit card is not for you, so what are the other options available to you?
You may want to consider a ‘prepaid credit card’ instead of a credit card. A prepaid card allows you to build up a good stock of money, and you are only spending money you have. It can also show lenders that you manage your own money well.
Prepaid credit cards
Prepaid cards are similar to credit cards, although the main difference is that the money is pre-loaded, so you can only spend funds you have. Most retailers will accept pre-paid credit cards in the same way as normal credit cards, so you can enjoy peace of mind that your card will be accepted by most companies.
These cards are:
- Ideal for helping people to build up their credit score, but without the risks of a credit card
- Allow you to stick to a budget
- Easier than cash to carry around, and accepted by most retailers
- Safer than cash to carry around
- You can keep track of your money much better than with a credit card.
Plus, if you are still concerned about giving your credit card number out when you make purchases online, using a prepaid card may give you some more security.
A debit card is the card you get with your bank account, and as it is linked to your account, you can only spend the money you have. If you don’t have money, you can’t use it, so this reduced the risk of overspending.
There is usually no restriction on using debit cards, as they are accepted in most place. You may also be able to get a prepaid debit card which is similar to a prepaid credit card. It is a good way to manage your money, as you can only spend what you have. It will encourage you to keep your bank account nice and full!
Is there a way of building your credit score without a credit card?
Despite what you may be told, you can live without a credit card. Although credit cards seem to be commonplace these days, you don’t need to have one. It is much better to save your money, but if you can manage the credit card effectively, you may find it beneficial for your credit score and for use in case of an emergency.
If your credit score is low, you will find it hard to get credit in the future. If you want to improve your credit score, you should aim to keep any credit you have in a manageable way. Pay everything on time, and you won’t go far wrong.
You don’t necessarily need the Amazon Mastercard to build up your credit score, but it will help, as long as you manage these efficiently.
If you aim to completely clear your balance every month, you can not only build up a good credit score, you can also avoid high interest payments and other charges.