Credit Cards: What You Need To Know

October 24, 2012

Credit Cards

Credit Cards: What You Need To Know

Credit Cards: What You Need To Know

 

Credit cards are a part of life for most people and can offer a flexible way to pay for expensive items such as a new cooker or provide a temporary cushion during lean months. However, there are some points to bear in mind when using credit cards.

 

Not Everyone Gets the Best Deal

Credit card providers will often entice consumers with attractive sign-up offers such as 0% interest on balance transfers and lower interest rates on new purchases, but these offers are typically only available to those with a flawless credit history.

This means that if you have ever missed a debt payment or already have a large amount of outstanding debt, you are unlikely to be approved for the deal that sparked your interest in the first place.

If you’re not sure what your credit report contains you can request a copy from a credit reference agency such as Equifax or Experian before submitting your credit card application.

Monthly Payments

If you have a balance on your credit card, you will either have to pay the balance in full when you receive your statement or make a monthly payment toward the outstanding amount. The balance and interest rate will determine how much the minimum monthly payment will be, but if you fail to pay this amount each month and on time your credit score will be affected.

Additionally, if you only pay the minimum payment each month you will pay more in interest over the life of the debt and it will take longer to pay back.

The Advertised Rate

The annual percentage rate (APR) advertised by a credit card company is simply the rate that was offered to at least 51% of applicants. Credit card providers are required to indicate a representative APR when advertising a card, but those who do not meet the criteria for the advertised rate may be offered a less attractive rate.

Your Credit Rating

Every time you make an application for credit the provider will check your credit history as part of the application process. This check leaves a ‘footprint’ on your credit report, which indicates that you have applied for credit. Making several applications can damage your credit score and hamper your chances of making a successful application. Only apply for one card at a time and don’t apply unless you feel you have a good chance of being accepted.

However, if you are turned down for a conventional credit card you may be eligible for a credit builder card. These cards are designed for those who have had issues in the past such as defaults but now want to repair their credit rating. Credit limits tend to be a maximum of 500 and interest rates are usually higher than those offered on standard credit cards, but these cards offer a pathway to borrowing on better terms if managed sensibly.

Cutting the Cost of Debt with Your Credit Card

If you have existing debt, such as a store card, that is subject to a higher than average rate of interest. You may be able to save money over the life of the debt by transferring the balance to a credit card that offers a long 0% interest period or a more competitive rate of interest.

Before doing this, ensure you are clear about any associated transfer fees and take the time to calculate the cost of moving the debt to a new card to ensure it is financially viable.

This guest post has been contributed by Zoe on behalf of So Switch. Compare credit cards online to find the best deal for you!

Credit Cards: What You Need To Know

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Credit card providers