If you think that you will
easily be able to pay off your credit card balance at the
end of each month, then a credit card could be a good way
of spreading the payment of bills and spending. If you are
planning to use a credit card as a way of borrowing money
on a longer term basis, be very careful about which one
you choose. Only pick a credit card which has a low APR
- Annual Percentage Rate or you could find yourself running
up insurmountable debts. It would probably be a better idea
to investigate getting a personal loan if long term borrowing
is your plan.
A 3 Step Guide to Credit CardsCredit
cards are a convenient method of obtaining credit. They
are available from all major lenders and provide flexibility
for the consumer. Some basic facts about credit cards are
set out below.
STEP1 - Which Card?Standard
- Visa and MasterCard are two of the common credit cards
available.Platinum and Gold cards - these are usually available
for people with higher levels of income, and have benefits
attached to them.Charity and Affinity Cards - these operate
in the same way as standard credit cards but a small percentage
of what you spend is donated to the charity to which the
card is connected.Loyalty Cards - These cards tend to offer
incentives such as cash bonuses, AIR MILES, points and other
PROSCredit cards are international
and can be used all over the World, wherever you see the
logo on your card. Credit cards can provide you with instant
access to cash, (for which there is usually a fee payable).
Goods can be purchased quickly and easily, in person, over
the phone, or on-line! Some companies offer insurance on
your purchases, and can protect your goods in the event
of loss or theft. They can also provide you with travel
CONSCredit cards tend to be
expensive and are hard to control. It is advisable to keep
your receipts of purchases made. Mistakes do happen and
you should cross check your receipts with your monthly statement.
Any discrepancies should be reported immediately to the
company. Other forms of borrowing can prove cheaper, e.g.
a personal loan or extension of your existing mortgage.
These options should be considered before applying for a
credit card. Purchases made abroad may not appear on your
statement for a few months and it is therefore difficult
to determine whether or not they have been debited to your
RATES AND FEESCredit cards
attract annual fees and interest charges. Interest rates
tend to be high and vary between companies. Some companies
provide interest free periods. Other companies have penalty
payments for late or returned payments or if you exceed
your credit limit.
REPAYMENT OPTIONS.Most credit
card companies insist on you repaying the minimum repayment.
This can be found on your monthly statement. Alternatively,
they request that you repayment a percentage of the outstanding
balance, for example, 3-5%.
DECIDING WHICH CARD.In deciding
which card is the best for you, you will need to assess
how you use the card. For example, if you use the card for
convenience shopping and would want to repay the full balance
at the end of the month, then cards that offer a long interest
free period with no annual fee could prove more appropriate.
If you use the card for ongoing borrowing, and intend to
pay off the minimum amount every month, then a shorter interest
free period with lower rates might suit you better. If you
travel frequently, it may be worth considering a card, which
allows you to pay your bills via direct debit.
STEP 2 - HOW DO I APPLY?Applications
forms are usually completed and submitted to the credit
card Company. A decision on whether or not you are acceptable
is given within a couple of days. Credit card companies
use Credit reference agencies in determining your application.
Credit reference agencies provide a detailed analysis of
your own financial position. In particular any county court
judgements, electoral roll details and previous credit searches
made against you. If you are refused a credit card, or wish
to make enquiries concerning your own credit file, you can
apply to the credit reference agency for your record. They
will charge a small fee. Details of how to apply will be
provided by the credit card Company.
STEP 3 - HOW AM I PROTECTED?As
discussed above, some companies offer 100 days protection
against goods purchased. This can include damage, loss or
theft but you should see what each company offers. It is
advisable to memorise your Personal Identification Number
(PIN). Note also, the card number, and issuers details and
keep them separate from your PIN. In the event of loss or
theft you can therefore easily contact the credit card company
to "Stop" your card. Protection is also offered from the
company, by registering your card with them. An annual fee
is payable. In the event of loss or theft, the company sorts
matters out for you, providing you with a replacement card.
Some companies also offer insurance against loss, theft
or misuse of your card.
IF THINGS GO WRONG.If you
are unable to meet your monthly repayments and are struggling
to repay your outstanding balance, you should immediately
contact the credit card company. The earlier you approach
them, the more sympathetic they will be to your situation.
Alternatively, seek advice from an alternative credit card
company, which provides lower rates and fees. If you are
in need to desperate help, you should contact one of the
voluntary organisations for assistance.