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
Click Here to view
available credit cards in the US
[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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