Credit Cards...

[Tesla]

...Where to start

 

It's been advised from a few sources (bank, and credit score websites..) in the past that i should get a credit card in order to improve my credit score (assuming i spend within my means...)

 

My parents have never had one, so I know next to nothing about them. Has anyone had experience of using them for the above purpose? Or is it all talk from both banks a credit score websites in order to maybe fund themselves?

 

Am i right in thinking that if i pay money back on whatever i spend on them withing a certain time period, I don't pay any interest ever? Or is there a catch to that?

 

Any advice/tips appreciated!

[NB9457]

If you pay off what you spend within in the month there should be no interest. They can be a good way to boost your credit as it's essentially a way of proving you're good at borrowing.

 

Apparently though, having a credit card and not using it can also affect credit badly as backwards as that sounds. (Not sure how true it is, but has been said by a few people)

 

But that being said, is there anything you need to boost your credit score for and have you checked what your existing score is?

[tommej]

There are certainly some benefits to having a credit card as long as you pay it off in full each month. This is pretty hard to screw up these days with access to apps etc to pay off your card as soon as you make purchases.

 

That being said if you don't require one I wouldn't let the banks try and push you to get one!

 

lots of info here: Credit Card Decision Tree | MoneySuperMarket

[fiza]

You can get a free check on your credit score from here;

 

https://www.clearscore.com/

 

https://www.experian.co.uk/

[HarryMonkey]

My parents had a card which they used mainly for petrol and had something like a £10,000 limit on it. Because they paid it off at the end of each month, the cc company dropped their limit down to £500 and eventually didn't renew the card, they clearly don't want to attract that sort of customer, they want the ones that just pay the minimum payment each month and thereby pay the most interest.

[elsiegee40]

We have paid off our credit card bill in full every month for decades. Never had the credit limit dropped or the card pulled.

 

We do use our cards quite a lot. It's our default payment method. It all goes on the card and it all gets paid off every month without fail.

 

You need to be very disciplined to do this. We keep all the receipts for the upcoming bill and keep a note of what's been spent so we know exactly what the bill will be when it arrives.

[Bedders]

I let my spending get a grand or so over what it should have been. So I opened a second credit card with another bank and took advantage of a 0% transfer fee, 0% interest on balance transfers offer for 20 months. Moved all of the outstanding balance onto that card, shredded the card when it came so I can't spend on it, and pay a set amount each month so that it will be paid off after 18 months.

 

On my original card I have now started spending wiser (I started to run this bill up a couple of years ago, each month spending a bit more than I paid off).

 

Credit cards are very useful - buyer's protection of purchases over £100 (I think the upper limit is £10,000?) can come in handy!

[Joanne]

If you get things on credit, this also counts towards your credit rating (eg/ a car, furniture)...

[Bedders]

If you get things on credit, this also counts towards your credit rating (eg/ a car, furniture)...

 

A mobile phone contract also

[HTCPCP]

I've got a credit card - with a direct debit to pay off each month. Just make sure you have the money in your account, and don't use it to withdraw cash and you are fine. I just use mine to buy train tickets - small amount each month, but enough to show you are trust worthy!

[hardtailstar]

I would add that if you are paying off by the end of the month and the payment day falls on a Saturday/Sunday then make sure you pay on the Monday before.

 

I have been caught out thinking I had paid it off but it hadn't cleared because of the weekend.

[Fazza]

If you get a credit card and they give you a £500 limit to start with, if you dont use it (i.e. you pay it off each month) they tend not to raise it too much. If you use it to within 60%+ of the limit (in my personal experience) then they tend to up the limit every 6 months or so. Yes it will cost you some interest if you do that, but it will build or rebuild your credit rating. I use ClearScore and recently a credit card I use got a limit increase by a few thousand pounds and this made my credit score go up as it shows you can be trusted to spend up to that amount.

[Arreks]

Worth noting, I don't pay my credit card off in full each month but rather pay around 5-10x the minimum. My credit score has been going up substantially since I got the card a few years ago so I don't think you necessarily have to pay off in full each month (that is probably just the best thing to do) - just be reasonable with it.

[Tesla]

Thanks for help so far.... a few more questions.

 

1) When there's a limit, i assume thats how much you can spend on that card in any given amount of time...?

2) What the heck is a balance transfer??

3) What's the APR thing then, how much you'd have to pay extra on top if you don't pay it back in the month?

4) Any recommendations? I hear the Tesco ones tend to be good, as you also get clubcard points with any purchases made on the card....

 

 

Sorry for all the questions, my banking level is very basic (Just have/had a debit account and 1 basic savings account in my lifetime...oh and a mortgage)

 

Oh and FYI in reply to a couple of points raised.

3 year fixed rate mortgage thing runs out in March 2018, so hoping a better credit score may lead to better rates (that's my understanding anyway?) and also with loans in mind?

And OH already has a car contributing to their score, and i have a sofa, + phones etc...

[Tesla]

Worth noting, I don't pay my credit card off in full each month but rather pay around 5-10x the minimum

 

5-10x the minimum of what? Sorry if i've missed something...

[sted]

5-10x the minimum of what? Sorry if i've missed something...

 

on your credit card statement there is a minimum amount you have to pay and a what you owe box if you dont meet the minimum payment they charge you and i assume thats really bad for your credit record

 

so say you spend £500 on your card in a month the minimum payment will probably be £50

[Tesla]

on your credit card statement there is a minimum amount you have to pay and a what you owe box if you dont meet the minimum payment they charge you and i assume thats really bad for your credit record

 

Is the minimum amount the same each month or is it dependent on how much you've spent on your card?

[Joanne]

say you spend £500 on your credit card, the min payment might be £25. So 5 - 10 times will be £125 - £500

[Arreks]

This ^ avoid paying the minimum and never miss a payment because bad things will happen.. probably..

 

It's just easier for me with my terrible spending habits to pay a decent set amount each month rather than the full, the overall amount on the card still goes down and some months when I can I pay more.

[Joanne]

I can't handle credit cards. Tried twice and I can't do it. I just think.... EHHH it can go on the credit card because I have 24 months 0% credit.... I'll pay it off... SPOILER: It was hard to pay off.

[sted]

if you only ever pay off the minimum youre going to get yourself into a whole heap of debt (luckily cc debt dies with you one of my grandmas basically did this for years so im told). i have a direct debit to pay the full amount of every month but i really only even have a credit card for internet purchases (as it gives you more comeback) and credit history (as ive only ever had 1 loan bar my mortgage) i dont even know the pin number for my credit card lol

[DJ-1701]

Is the minimum amount the same each month or is it dependent on how much you've spent on your card?

 

Depends on how much you spend on your card.

[NB9457]

A very good website if you're unsure on anything is Money Saving Expert, come in use many a time for me.

[Max_Power]

I use mine to pay for what can be considered big purchases over the course of the interest free period.

 

Car insurance and football season ticket are good examples. To pay monthly with the car insurance or football club is generally x amount plus a tiny bit of interest for doing so. Where as with a credit card I pay in one lump at 0% interest on the credit card and pay off a set amount each month until paid off in full over the 0% interest period.

 

Improves credit score, and its a cheaper way of paying off car insurance if you cant usually afford the one lump payment.

[Tesla]

I can't handle credit cards. Tried twice and I can't do it. I just think.... EHHH it can go on the credit card because I have 24 months 0% credit.... I'll pay it off... SPOILER: It was hard to pay off.

 

So when it says 0% 24 months etc, what does that mean? Do you still have to pay cards off monthly? and what happens after the 24 months?

 

Edit: I think @Max_Power 's post just explained it...but feel free to divulge.

 

A very good website if you're unsure on anything is Money Saving Expert, come in use many a time for me.

 

I had looked on there but i still struggled to digest the information..

Edited June 6, 2017 by Tesla