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Information on Credit Cards

by Jim ONeil on September 7, 2010

We aim to provide you straightforward and clear information on what credit cards are, their benefits, how they work and what to look out for. Make sure that you read thoroughly so that you would know what to keep your eyes open for when you think about getting a credit card.

What is a Credit Card?

credit cards picsCredit cards are different than debit cards. These cards allow you to spend funds and be billed for the amount later on like shopping in a mall. The debit cards would take the money directly from your bank account so you would actually be paying when you are busying.

With credit cards you would be presented with the bill every month, if you pay the entire balance before the date for the monthly payment then you would have a benefit since no interest would be charged. However, on missing the due date, you would have to pay an interest.

These cards allow you to get cash from the ATM machines but you would be charged a fee when you do this.

The Main Benefits of Using a Credit Card

If you use credit cards wisely, there are a few benefits. However, if credit cards are used irresponsibly it could land you in some difficult situations which can lead to a growing debt and a bad credit score.

The main idea of a credit card is that you would be able to borrow the money if you do not have it at the time and then pay it off later. These cards also offer you protection on the purchases exceeding the value of 100 GBP so if you have problems or issues with the goods or services, the retailer would have to provide a refund.

What is an APR?

APR is the Annual Percentage Rate. It is the amount which the provider or the lender would charge when you borrow the money.

Different lenders have different systems in which they work out the rate so you might have different answers.

Basically, the loan length and the rate at which the amount is paid back would affect the cost of the loan for you. However, the Office of Fair Trading and APACS disagree on whether this should be a part of the APR or not.

What is Balance Transfer?

Quite a lot of people today choose to manage their debts with the help of balance transfers, and because of this, almost all credit card companies today offer the facility to their customers and many have also introduced special credit cards for this reason. Balance transfers are a low cost and convenient way to manage debts.

Well, this might all seem to be good news, and it is for the most part but there are a few things which could be confusing and might prevent you from making the best decision. Ensure that you know all the details and read all the details to get the best possible deal.

You can transfer your balance on any card which offers it and there are no limits on the number of transfers on the card. However, you would need to be within your credit limit’s 95%.

What about the Fees and the 0% Balance Transfers?

Several cards offer balance transfers at 0% for fixed periods of time after which the interest rate would return to normal. Ensure that you know what would happen to the outstanding debt after this time and the relevant dates. Also, you would need to know the regular interest rate since plenty of cards would charge steep overall rates.

Most card companies would charge a fee of 3% on the total amount that you transfer for every balance transfer.

A Useful Tip

Read all the small print. The terms and the conditions are there for your protection and if you take the time to know whether the deal will be suitable for you, you would ensure that you manage your debt in the best possible way.

Credit Cards for Students

There are dozens of credit cards offers surrounding us today. However, it is a good thing to think twice before you sign up for any.

There are several companies that would offer you quite a lot and the cards would actually cost you a lot more than promised with several attached risks.

If you fall behind the payments and overspend, you would soon end up in a lot of debt.

Why Do Credit Card Companies Offer Cards to Students?

Students do not have jobs and thus offers like these do sound strange. However, companies tend to think that students are a good risk. This could be because people stay loyal to the first card that they get and hence they might stick to the company for several years.

What are the Advantages of Credit Cards?

If you obtain and use credit cards sensibly and make the payments regularly, you would be able to build up a positive credit score and history. A good history would enable you to get benefits in the future when you apply for any type of loan like mortgage, car loan etc.

The other advantage of a credit card is that you would have some security in emergency situations, have some independence financially and would not need to carry cash.

How would I Be Billed?

Credit cards are different than loans, they would not allow you to spread the borrowed amount over a long time period. You would have to make a monthly payment and the amount would depend on the amount that you have spent. The details on the minimum payment amount would be in the terms and conditions of the card.

This minimum amount could be 2% of the outstanding balance on your card. However, you should know that if you just make the minimum payment every month your debt would keep on growing. Also, these companies would charge you penalties for late payments and a higher interest rate on the cash withdrawals.

Are Credit Cards Right for You?

Whether a credit card is right for your or not would depend on whether you think you would be able to handle the responsibilities. Credit cards are not difficult to obtain, but they are hard to manage and it is easy to have the situation out of control. Carefully think if you would be able to afford a card and if it is worth all the risk.

You would need to ask yourself if you need a card, whether you would be able to afford it and if you would be able to pay the balance off each month.

If you want to apply for a card, look around. The things that you should keep in mind are:

  • Low finance charges or interest rate, known as APR
  • No or low annual fees
  • Grace period before the finance charges are applied
  • Other benefits like airline miles, free gas and purchase warranties.

What Would I Need to Stay Aware Of?

The interest on the outstanding balance could be 20% or higher so you would have to be careful and not keep too much debt. The interest is known as finance charges.

The fixed rates are actually changeable but the company would have to inform you in advance.

Read the statement carefully and if you have any questions contact the company immediately.

There would be a high charge for the cash advances and the interest would be charged as soon as you withdraw the amount.

The annual charges could be quite high so find out what the charges are for your card.

If there is a good introductory offer on your card, then ask when the offer would expire since the rate could be higher after that.

Think twice about the purchases. If you are unable to make the purchase currently, you should be sure that you would be at the time of the billing.

What Can I Do If I Get Behind?

Cut down on all the recreational expenses and set up a tight budget.

The credit company would be able to provide you a repayment strategy so call and ask for all the options.

Understand where you went wrong and do not make the same mistake again. Bad credit can create plenty of problems for you in the future.

Use the services of credit counseling since there  are plenty available and they can help you get back on the track.

All About Credit Builder Cards

When their credit history is blemished or non-existent, UK consumers may only qualify for credit cards for bad credit applicants. In addition to these bad credit cards, UK consumers who want to improve their credit can find credit rebuilder cards.

Wise use of these cards will increase the credit score without costing much money in the process.

Mainstream credit card issuers have become more selective when it comes to approving applications. If they are not rejected for a card, applicants with poor credit history will find the terms very unattractive.

Even someone with no credit is likely to be denied a conventional credit card, leaving the younger population out in the cold.

Bad credit credit cards are available to a larger segment of the population, including people who have had debt issues. By making regular on-time payments on a credit builder card, consumers begin repairing their credit history.

Young people and others who have no credit can also show lenders that they are responsible by using this credit card properly. This will begin developing their credit record in a positive way.

With one of these cards, it may take only six months to improve the credit rating. It should then be easier to qualify for a mortgage, loan, or mainstream credit card.

The drawbacks to these credit rebuilding cards are the interest rate, which often exceeds 30 percent, and a credit limit that is often £500 or less. Charging only small ticket items that can be repaid within the month is the best way to use these cards.

While using these cards, consumers should regularly review their credit report and their credit score. This reflects the positive impact that the credit card is making on their credit history.

It is nice to see almost immediate improvement in the credit rating without having to make any drastic lifestyle changes.

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