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.
STEP1 - 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.
STEP 2 - HOW DO I APPLY?
Applications 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 judgements, electoral roll details and previous credit searches made against you. If you are refused a credit card, or wish to make enquiries 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.
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 memorise 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 to desperate help, you should contact one of the voluntary organisations for assistance.
