Credit Card Credit Card! What is it?
A credit card is a plastic payment card usually issued by banks and other
financial institutions (also referred to as providers). It can be used as a
means to pay for goods and services in shops, online or over the telephone. The
card holder is given a credit limit by the card issuer which the card holder
must not exceed. Essentially, a credit card is a form of a loan, where a
financial institution gives you an advance for paying for goods now.
The card holder must usually make a repayment to the card provider each month to
either pay off in full what they have spent for the previous month or pay some
of what they have spent. A card issuer will usually charge interest at a set
rate if a balance on a credit card is not repaid in full each month.
The market has become completely saturated with credit cards over recent years
and there are now hundreds of different credit cards available through many
financial providers.
Many of the cards available are similar and generally offer the same features.
This is why it can be a difficult decision when choosing a card that will give
you the benefits that fit with your spending lifestyle.
We are conscious however, that there can be a big difference in some of the
benefits offered by some card providers and most commonly, there can be a big
difference in the interest rate that you are paying. This is would be partically
important for people who do not clear their balances in full every month.
Most people want a new credit card to either obtain a lower interest rate for
purchases or to get a low balance transfer rate. Some people may want a
combination of the two.
We have therefore, decided to make our
credit cards comparison table very simple so that you can sort what is on
offer to fit your end aim. Whether it is the lower purchase rates, low balance
transfers rate, best loyalty card or just the best all rounder. Our tables will
show you the best one for your needs.
What is a Balance Transfer?
For those people who already have a substantial balance on their credit card
could benefit by transferring their balance to another credit card that offers a
lower interest rate. This can be a good thing as it can allow you some breathing
space if you are having financial difficulties and are struggling with the
repayments on your existing card or the interest that you are accruing each
month is getting out of control.
What are the benefits of Balance Transfers?
The idea of a balance transfer is to open a new credit card with a new provider
that is offering a preferential rate (usually 0% for so many months) and
transfer your existing balance to the new card.You can then close your old
credit card account. This will allow you to get your monthly repayments back
under control in the knowledge that you won’t be charged any interest for the
promotional period of the balance transfer.
What are the disadvantages of Balance Transfers?
It is too easy to get into the habit of transferring balances from card to card
and not actually dealing with the problem of repaying the debt you owe. By all
means, use a balance transfer to help you reduce the interest you are paying,
but don’t become dependent on keep transferring debts around. Also, you need
to remember that all the credit card accounts that you apply for or open will
show on your credit file which could affect your credit rating
A couple of years ago, everyone was offering promotional 0% balance transfers
with no fees and these became very popular. However, once the promotional period
was up, most people would transfer their balance on to another 0% card and so on
and so on. Banks and other financial institutions soon cottoned on to this and
it is now quite rare to find a 0% promotional offer that doesn’t also incur an
upfront fee for transferring the balance. Banks realised that they were losing
out by offering cards with 0% interest rates with no fees.
Most providers will now charge you a 3% handling fee when you balance transfer -
that is to say, they will charge you 3% of the balance you are transferring to
their card upfront. Therefore, it is important to consider this fee if you are
going to be transferring your balance from one provider to another - it could
end up costing you more in charges in the long run than you may have paid in
interest.
What is an introductory purchase rate?
Many providers will also offer an introductory purchase rate when you open a new
account. Put simply, they will offer you a period (usually 3 months) from when
you open the account where you will not be charged any interest on any purchases
made within those 3 months.
Most providers will normally offer a period of days (usually 56 days) from the
date that a purchase is applied to your credit card account before you start
paying interest on that purchase. The benefit of having an introductory purchase
rate is that, this interest free period is just extended for a little bit
longer.
Remember, an introductory purchase offer is exactly what is says – introductory!
The interest free period will end after a few months and you will normally then
revert to paying the standard interest rate.
What about loyalty rewards?
A loyalty card is no different to any other card. The only exception is that
these types of cards usually reward you with extra benefits depending on how
often you use them, how much you spend etc. You will normally find that
supermarket credit cards reward you with additional vouchers and money to spend
in the stores or you are able to earn Airmiles which can be converted into
flights, holidays and travel.
