The Rate Tart

TheRateTart Credit Card Guide


Contents
  1. Introduction
  2. What type of credit card is best for me?
  3. I always pay the full balance every month
  4. I have an existing credit card debt that I want to transfer
  5. I mostly pay the balance off each month, but not always
  6. I want a credit card but I've not got a good Credit History
  7. I'm thinking about getting a store card
  8. How do I protect against credit card fraud?
  9. I can't repay my credit card bill
  10. Tips from TheRateTart
Introduction

Getting hold of a credit card is a lot easier than it used to be. But knowing which one to choose in the first place and using it wisely is not straightforward. TheRateTart guide to credit cards will help you choose the best card for your needs and let you in on some handy hints and tips to help you adapt to changing circumstances.

What type of credit card is best for me?

The answer depends on how much of your balance you intend to pay off each month. Click on the link below that most accurately describes you:


I always pay the full balance every month:

If you always pay off their balance in full you could consider a card that gives you or your favourite causes greater rewards e.g. a reward card or charity card. Also consider setting up a direct debit to pay off the balance in full each month. That way there is less chance of being caught out and paying interest at a high rate. (Of course, you still need to manage your spend and current account balance carefully, or you could get stung at the other end with overdraft charges).

The main types to consider are:
Reward Credit Cards. These cards give you a little something back based on the amount you spend on them. What you get back and how much depends on the card, so make sure you choose carefully. Typical rewards include cash-back at the end on the anniversary of the account opening, air-miles and super-market loyalty points. Some have introductory cash-back rates that drop right down after a set period. By registering with TheRateTart you can set a free email alert to remind you when its time to shop around for a better deal.

Charity Cards. You know how sometimes a good splurge on the credit card can feel like much needed therapy . Well, charity cards are your way of sharing the love in a kind of group therapy session sort of way. Simply put, when you apply successfully for a charity card the card provider makes a donation to the nominated charity. Thereafter donations are often made for subsequent purchases, either with each purchase made or at regular spend increments (e.g. every £100).

Gold and Platinum Cards. It used to be the case that owning one of these cards meant you were a king or queen of bling. Today the wage threshold for entry has been considerably reduced so there is less social status attached. However there are some practical benefits such as free travel insurance, purchase insurance etc. But be aware that other cards, such as Rewards cards and Cashback cards, are also available as Gold, Platinum and Black credit cards, and these might offer benefits that are more valuable to you.

Charge Cards. The only thing you really need to know about these is that the balance must be paid in full each month . Fine if you are confident that you will always be able to do that. But if not, you could be better off with a low rate standard card and a direct debit. If you are confident you will pay the balance off each month, consider applying for a reward, cashback or charity credit card. That way you or the causes you care about can get a little something back from your spending.

I have an existing credit card debt that I want to transfer:

With an existing balance to clear, you need a credit card that will give you the lowest repayment amount and not charge you too much in fees:
0% Credit Cards. There are two types of 0% offer available.
0% on balance transfer credit cards are aimed at saving you money by transferring existing debts from other, higher interest rate credit cards. In some cases you can also transfer debt from current account overdrafts. You need to make sure you know whether any fees are charged for transferring a balance, and satisfy yourself that the total cost of borrowing in this way is the best deal available.

0% on purchases credit cards allow you to make interest free purchases for a fixed period. Either for a number of months from the date of account opening or up to a fixed date. This can be very useful if you are about to go through a period of increased spending such as the birth of a new baby.

Both these types of offer are for a fixed period only, so you need to make sure that by the end of the period you have cleared the debt or transferred to another low or no interest rate card.

Increasingly these come bundled in a single package. If you are interested in a 0% card that does not offer 0% on new purchases, tread carefully. Do not use a card like this for new purchases because you are likely to pay a high rate of interest for any new spend you rack up. And you may have to clear all of your existing debt before any repayment you make starts to clear the new debt you build up.

By registering with TheRateTart you can create free email alerts to remind you when the introductory period is over and it's time to shop around for a better deal.

Standard Rate Cards. These credit cards are all about the interest rate. They don't approve of the flashy gimmicks offered by some of their show-off cousins. These guys believe in good old fashioned values and just want to get your attention based on prices. And yes, as with most puritans some of these are a little hypocritical and offer rewards or introductory rates as well. But if you can get a great standard rate together with some nifty bells and whistles, that's all good. But in most cases, 0% cards - even those with fees - will be cheaper to borrow against.

I mostly pay the balance off each month, but not always:

Be very careful. You may not be doing yourself as much as a favour as you think.

The first question to ask is why you are doing this. If you can't afford to pay the full amount, are you consistently spending above your means? If you are, more than getting another credit card, you need to get your budget under control. The Citizen's Advice Bureau can help you with this.

If you are just going through a temporary period of increased spending that you can afford to pay back in a defined period, consider a 0% credit card for both purchases and any outstanding balances. The reason why we suggest caution in this situation is because you may well be paying over the odds for the money you are borrowing. It's not unknown for:

  • Credit cards to charge interest rates several times more than a loan would cost.
  • Payments to clear balances at low rates of interest before they clear balances that attract higher rates (if you pay off £100 of a £500 debt, this may be against the part of the debt that attracts the lowest rate of interest not the highest - so you pay off debt at the 0% balance transfer rate before you pay off the debt attracting 20% APR).
  • Partial payments to have less effect than you assume on the amount of interest you pay (if you pay off £100 of a £500 bill in February, in March will you still be paying interest on £500 minus the minimum payment or £500 minus £100?. Check your terms and conditions; you may be in for a surprise).

If you are about to go through a period of increased spending, 0% on purchases credit cards allow you to make interest free purchases for a fixed period. Either for a number of months from the date of account opening or up to a fixed date. Unlike 0% on balance transfer deals, these purchases typically continue at the interest free rate until fully repaid. Essentially this is an interest free loan for any products you buy in that offer window.

I want a credit card but I've not got a good Credit History:

Get ready for a shock. Credit card issuers love you, because they have an excuse for charging interest rates no other customers would accept. The first thing to do is check whether you can fix your credit rating problems with a free service like Experian Credit Expert. If not, consider a credit card designed for people with CCJs or other impaired credit. Some aren't much more expensive than standard low rate cards. If you reliably pay the card off these cards can help to build or mend your credit rating in much the same way that paying back a loan would.

I'm thinking about getting a store card:

Right. Listen carefully. There is only ever one reason to get one of these cards. And that is to blatantly take advantage of the hefty reductions offered on high end purchases by making an application for one of these cards (often up to 10 or 15%). Even then, once the card comes through the post promise you will cut it up, throw it out and close the account that very day. Not tomorrow, not at the weekend, not next weekend. That – Very – Day. Why? Because these cards:

  • Typically charge super-high rates of interest (up to 25-30%)
  • Rarely offer any other types of incentive for using them (0% offers, cash-back, air-miles etc)

Want to know more? The Tips from TheRateTart section in this Guide shows you how to find typical stings in the small print.

How do I protect against credit card fraud?

Most credit card companies will offer payment protection insurance to guard against unauthorised use of your card. This may appear to provide peace of mind. But in reality you may end up paying to insure the credit card company's risk, not your risk. Unless the card companies can prove you have been negligent in the use of your card, the credit card company not the card holder will be liable for the fraud. You wouldn't insure someone else's car for them, so why pay to insure the risk that you can't pay the credit card balance? Check the terms and conditions before you buy to find out what you are really protecting yourself against.

It's also worthwhile bearing these tips in mind:

  • Don't keep your PIN numbers with your cards. The best option is to memorise them, but if you can't then keep the records somewhere secure and separate from the cards themselves. And never disclose them to anyone else.
  • Keep your receipts and check them against your monthly statements to quickly identify any transactions you don't recognise. In reality many credit card companies will spot unusual transactions before you do, but it is good to have records to refer back to.
  • If you are getting rid of monthly statements, don't throw them in the bin intact. These statements contain sufficient information for someone to use your credit card account illegally. Rip statements into small pieces, or use an office shredder before disposal.
  • Phishing is when a fraudster calls you pretending to be from your card issuer and tricks you into providing details of your card. No reputable bank or credit card issuer will ever call or email you asking for the details of your credit card. If this happens to you treat it with the scepticism it deserves.
  • Finally, consider programming the 'Lost or Stolen Card' phone number into the address book on your mobile. T his number is usually on the back of the card, you may not have easy access to it when you actually need it.

I can't repay my credit card bill

If you find yourself struggling to repay your outstanding balance or unable to meet your monthly repayments, then immediately contact your credit card issuer. They will be more sympathetic if you approach them sooner rather than later. Alternatively consider a balance transfer to a card with lower interest rates. But you will need to do this before you become too bogged down and start missing payments, or you may find it difficult to get accepted by another credit card provider.

Remember, free advice is also available from your local Citizens Advise Bureau, the National Debtline on 0808 808 4000 or the Consumer Credit Counselling Service on 0800 138 1111.

Tips from TheRateTart

This is not an exhaustive list, but here are some tips from TheRateTart to bear in mind when applying for credit cards.

Interest Free Periods. Interest free periods for balance transfers for new purchases are great, but it doesn't follow that the same cards offer the best rates outside the introductory period. Make sure you know exactly when the introductory offers end and what the standard rate reverted to is. To receive a free email alert when it is 'Time to Tart register with TheRateTart. You can add any existing cards or other products to your profile and set an alert for the date of your choice. And as a registered user we will store details of any products applied for through TheRateTart to make setting up alerts even easier. You can edit or remove these later if you wish.

Allocation of Payments. Some banks and credit card issuers are canny about how they allocate payments against an existing balance. Say you have £1000 balance on a card made up of £700 interest free from an introductory offer and £300 at the standard rate. Many providers will use any payments to clear the interest free £700 first, leaving the full £300 to attract interest for as long as possible.

If you have a 0% balance transfer card without an introductory offer on purchases, use a seperate low or zero rate card for any new purchases. If you have a card with an introductory low or zero rate card, only use this during the introductory offer period. Then look around for what's the current best deal on the market.

Balance Transfer Fees. When transferring an outstanding balance between cards it is important to check that the transfer charges are less than you will pay in interest by sticking with your existing credit card. Whilst most balance transfer charges are capped, some are not, which could mean you end up giving your money to a different bank!

Cash Withdrawals. Not a good idea under any circumstances. First off you will get charged a fee for each withdrawal you make. This is usually a minimum of £2 a transaction, but can also be a percentage of the total withdrawal. Effectively, this means that even if you only make one big transaction rather than lots of little ones, you do not get a corresponding saving. Secondly, interest is charged against these transactions from the moment the money leaves the cash machine (no 59 day interest free period here), and the rate charged can be higher than that for other purchases. Just don't ok.

Overseas Use. Using a credit card abroad can seem like a convenient alternative to lots of foreign currency and travellers cheques. In reality you may end up paying a steep price. Watch out for;

  • Cash withdrawal fees: Typically a minimum of £2 per withdrawal, but sometimes more.
  • Interest on Cash Withdrawals: Many cards offer a 59 days interest free period on purchases. This doesn't apply to cash withdrawals, so you start accumulating interest straight away on both the cash withdrawn and the withdrawal fee.
  • Currency conversion fees: Some credit card issuers charge a currency conversion fee of typically 2.75% per transaction. This may be add much for small amounts, but on larger purchases the premium can be significant.
  • Exchange rate: Check with your card to make sure th exchange rate offered is competitive against exchange rates available elsewhere.

Annual Fees. Very, very few credit cards now charge an annual fee. Nevertheless it's worth making sure that the card you are about to apply for isn't one of these. Any other benefits would have to be truly special to make this an offer you can't refuse.

Credit Card Cheques. Now these are a bizarre concept . Each cheque used will attract a handling fee and in some cases the 59 day interest free period does not apply, meaning you start attracting interest charges straight away. If you work for a credit card company and can explain the advantages of these over just using your credit card, please get in touch.

Missed Payments. These are really a no no. You incur a hefty charge from the credit card issuer and could also negatively impact your credit score. Most if not all credit card issuers will let you set up a direct debit to pay off the minimum amount each month. You can still pay more if you can afford to, but the direct debit ensures you never incur missed payment charges. If you are exasperated by the disproportionate size of penalty fees in relation to costs incurred, you may want to check out www.bankchargeshell.co.uk for the latest on the campaign to get these down to a more reasonable level.

To discuss this guide in our forums click here.
TheRateTart

Yahoo Search

Not found what you are looking for? Search the Web with Yahoo...