Find out About Credit Cards
Find out about Credit Cards and how to choose the best one for you
With so many choices now available to the consumer, the credit card market is highly competitive. There are many great deals being offered, such as zero interest rates on balance transfers and for purchases during the initial first 6 months or even longer. It makes sense to consider the advantages, drawbacks and legal protection that various different credit card issuers can offer you. By making the right choice of credit card you can enjoy using it as a shopping convenience with added extras, instead of it becoming a financial millstone.
About your Credit Card
Changing to a low APR or zero APR Credit Card
It's easy to become burdened by the high interest credit card debts. It is well worth considering changing your credit card provider for a more advantageous deal. Most of the credit card providers offer low or 0% interest when you transfer your credit card balance to them, and also 0% interest on purchases made in the first 6 months (9 months with some companies). This can give you a chance to pay off your debt much quicker, and save you plenty of pounds.
Credit Card Choices
There are many different credit cards, but most cards belong to one
of six main payment-card systems:
Credit Card Savings
A low or zero interest rate for even a limited period can be a great bonus, especially if you are struggling to keep up with the payments and interest charges on your present credit card. It is important to remember that the low interest is generally only set for a limited period, so try to pay off the debt before you become subject to a high interest monthly payment again. The main thing, even with 0% APR is to keep paying off as much of the debt you can manage every month, don't be tempted to opt for the minimum payment. The sooner you clear your credit card debt the sooner your card becomes a useful shopping convenience, instead of it being a financial burden. If you settle your statement in full every month it should cost you nothing.
Credit Card Disadvantages
Beware of using your credit card for cash transactions, cheques or
foreign currency exchange as there are withdrawal fees, (typically 2.5%
or more of the amount). Also you do not get an interest-free period
for cash transactions, so getting cash with your credit card is to be
Credit Card Advantages
If you purchase goods or services costing between £100 and £30,000 with your credit card, Section 75 of the Consumer Credit Act brings you an important legal right. If something goes wrong with your purchase you can legally claim against your card provider. This connected lender liability gives you legal protection when use your credit card, this can be especially important when making a large purchase. However, it is important to remember that you need to pay it off by the end of the month to be financially wise!
Before selecting a credit card ensure you get all the available advantages you can, as it is a buyer's market with lots of great offers around, such as cashback bonuses, air miles and free travel and purchase insurance. Choose your credit card carefully.
Changing Credit Cards
Find a better interest rate on your credit card
These days, there are many different credit card options available and because it is such a competitive market there are some really good deals around, with lots of added extras for the consumer. Also, changing your credit card provider is now easy to do, and many credit card companies offer the bonus of zero interest rates on your balance transfer.
Changing credit card providers can be a wise financial step, done to take advantage of low interest offers rather than just an emergency move because the monthly card payments are getting out of control. To be a 'credit card tart' (regularly changing to get the best deal) is admired these days, where it is now well accepted that it's best to 'shop around' for all services, rather than sticking out of a sense of loyalty to a specific bank or company.
In the UK consumers spent a record £31 billion on credit and
debit cards in the build-up to Christmas, recent figures from the card
industry have revealed. Credit cards are the most popular option for
internet purchases, due to the extra security they offer with purchases
of £100 or more being protected under the consumer credit act.
There are many different credit cards on offer, but you will find that most cards belong to one of the six main payment-card systems : MasterCard, Visa, Maestro, JCB International, American Express, Diners Club.
You need to decide what you want from a credit card before you can choose the right one for you. Credit cards now come with many incentives to attract new borrowers, such as: bonuses, points, cash-back, air miles, free travel/purchase insurance and most importantly low interest rates and 0% balance transfer rates.
No annual fee and cash back rewards
Credit cards that offer cash back, such as American Express Platinum, refund a percentage of your spending which varies according to the amount, beginning at 0.5%. The cash back is usually deducted from next month’s purchases.These credit cards are really only worth considering if you are going to pay off the entire balance every month. There are many rewards and incentives offered by credit card providers such as air miles or free travel insurance which you need to decide whether they would be useful to you.
Low or zero interest rate
The reason most people consider changing their credit card is because of the high interest rate. A debt can soon double with high credit card interest. Many credit card companies now offer 0% interest on balance transfers and purchases. Some cards allow you up to 56 days between buying and having to pay for it. Check that the low interest rate applies to new spending, and not only to your transferred balance. Some card providers offer both, others only on the transferred balance.
Changing credit cards to take advantage of a lower interest rate is a good move, but it is important to recognise that such offers are usually for a limited time. Due to heavy competition the Credit card companies seem to have extended this recently to around 12-13 months. The financially clever pay off the debt before they become subject to a higher interest monthly payment again. If you are planning on taking advantage of a zero or low per cent balance transfer rate, check carefully that there are no fees associated with the transfer.
Credit card protection
When using a credit card to purchase goods or services costing between £100 - £30,000, the Consumer Credit Act (Section 75) legally protects you. You can claim against your credit card provider if something goes wrong with your purchase. Because of this 'connected lender liability' it makes sense to use your credit card when making big purchases for your own legal protection.
Some card companies offer purchase protection, in addition to the legal protection of the Consumer Credit Act. You generally only qualify for this extra protection when you spend £100 on one purchase.
Credit Card warnings
There can be hidden costs with some credit card companies for certain transactions, known as 'handling fees', or 'withdrawal fees' if you use your credit card to draw cash - usually around 2.5%. For this reason getting cash out with a credit card is not recommended, also your interest-free period won't apply to cash transactions. If you withdraw foreign currency on your card when you are abroad, you can be hit with even more fees and the exchange rate may not be favourable!
Juggling too many credit cards is not a good idea, as well as being difficult to manage monthly, it can have an adverse effect on your credit rating if your prospective lender decides you hold too many credit card debts. Credit rating agencies can monitor the number of credit cards you use, and can request reports from credit card providers on your payment history.
Credit Card Debt too High
Refinancing by incorporating all your debts into one loan - a Debt Consolidation Loan - can reduce your monthly payments and enable you to take control of your finances.