A 3 Step Guide to Credit
Cards
Credit 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.
Step 1 - 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
discounts. |
Pros
Credit 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 insurance.
Cons
Credit 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
account.
Rates And Fees
Credit 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 repay 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. [Top]
Step 2 - How Do I Apply?
Application 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 judgments, electoral roll details and previous credit searches
made against you. If you are refused a credit card, or wish to make
inquiries 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.
Click Here
to view available credit cards in the UK
[Top]
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 memorize 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 of desperate help, you should contact one
of the voluntary organizations for assistance. [Top]
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