Credit Cards...

[JJonas]

Yes watch out for that 0% interest deal. Very easy to run up a big debt then find you are paying loads of interest when the deal expires. On a minimum repayment most of what you repay will be interest once the interest free deal has ended.

 

On the plus side you get insurance on your purchases when you buy stuff with a credit card so if you a buying something big (eg a kitchen) put it on the card then if the company goes bust before you get your goods you can claim on your credit card insurance.

[Bedders]

EDIT: Wow, I guess I had this thread open for ages before replying

 

Don't worry - all of this terminology is very confusing! (I only started to get a basic understanding myself, so here goes (disclaimer: I possibly have the wrong idea about some of these, as I tend to over simplify some things):

 

The limit is how much you can owe on that card. Remember that you can add money to your card too. For example:

 

My credit card has a £200 limit. I pay £50 on to that card. I now have £50 balance, and £200 credit limit, so I can spend £250 on that card. I will now pay interest on the £200 that I owe, unless I clear the balance by paying more on to that card. (I believe that if you have interest owing, it will take you over the £200 limit, just that you can't actually spend anything more on it).

 

A balance transfer is when you take money from one account and transfer it to another. In my case, I owed money to one bank (so the balance was essentially negative) and was able to transfer that to a different bank account to take advantage of one of their offers for new customers, and avoid paying any interest on the remaining balance

 

APR is basically that, yes - it's how much interest you pay over 12 months - so your actual interest will be the APR amount divided by 12 (unless I'm mistaken).

 

You have a minimum amount to pay each month on your credit card, based on how much you have spend in the last calendar month, in addition to any outstanding balance, and any charges and interest owed.

[hardtailstar]

EDIT: Wow, I guess I had this thread open for ages before replying

 

Don't worry - all of this terminology is very confusing! (I only started to get a basic understanding myself, so here goes (disclaimer: I possibly have the wrong idea about some of these, as I tend to over simplify some things):

 

The limit is how much you can owe on that card. Remember that you can add money to your card too. For example:

My credit card has a £200 limit. I pay £50 on to that card. I now have £50 balance, and £200 credit limit, so I can spend £250 on that card. I will now pay interest on the £200 that I owe, unless I clear the balance by paying more on to that card. (I believe that if you have interest owing, it will take you over the £200 limit, just that you can't actually spend anything more on it).

 

A balance transfer is when you take money from one account and transfer it to another. In my case, I owed money to one bank (so the balance was essentially negative) and was able to transfer that to a different bank account to take advantage of one of their offers for new customers, and avoid paying any interest on the remaining balance

 

APR is basically that, yes - it's how much interest you pay over 12 months - so your actual interest will be the APR amount divided by 12 (unless I'm mistaken).

 

You have a minimum amount to pay each month on your credit card, based on how much you have spend in the last calendar month, in addition to any outstanding balance, and any charges and interest owed.

 

My credit limit is 3 grand, I cant add money or spend over that.

 

Interest isn't added onto your credit as far as I know, its only on repayments

[witch]

Like elsiegee40, we have had credit cards for years and years and we always pay off the balance every month - we have never had our credit limit reduced - raised if anything.

We use the credit card for most things - we have a Tesco credit card and so we get Clubcard points for using it.

My advice is to think of it as just deferring your payment for a few weeks (until the bill appears). DON'T put anything on it that you cannot afford with cash - this means you won't be able to pay off the balance and will have to pay the very high interest rates. There are some good 0% deals around but if you are inexperienced then it might be hard to remember when the deals end etc.

My son was advised to get a card to increase his credit score and it did work. Now he puts food and petrol on the card and pays it off every month

[john]

I also do exactly like @elsiegee40 and @witch, I have a couple of them, use them for everything all month long as my default payment method and have a DD setup each month to clear them both in full so it helps my Credit Score and I know it is paid off. I work in similar principals as well if I don't / cannot afford it (by pay day) then I don't get it it will have to wait till I can afford it.

 

I have more than one card as one is better for foreign transactions as its no fee just the MasterCard rate (which isn't too evil) so use it for any non UK payments and when abroad.

[Localtechie]

Another tip is to sign up for the money saving expert credit club. Credit Club | Check Your Free Credit Report & Credit Score

 

It's free backed by Experian and emails you every month with an update on your credit rating.

 

For new credit cards, I recommend Aqua or capital one which will probably only have a £250-£500 limit but perfect as a starter card.

 

Always pay off the balance IN FULL every month!

[Tesla]

Another tip is to sign up for the money saving expert credit club. Credit Club | Check Your Free Credit Report & Credit Score

 

It's free backed by Experian and emails you every month with an update on your credit rating.

 

For new credit cards, I recommend Aqua or capital one which will probably only have a £250-£500 limit but perfect as a starter card.

 

Always pay off the balance IN FULL every month!

 

I always thought Aqua is one of those ones they give you easily but then charge £££ for any uses? Happy to be wrong mind.

 

Okay, so example, if i took out a credit card today, and spent £300 quid on.... ooo I dunno, let's say a Nintendo Switch, with the 0% 24 months interest deal, i could pay back say...£100 a month for the next 3 months as that is still within the 0% period?

 

...Whereas if that 0% period had expired, I'd have to pay that £300 before the billing month was over, and if I didn't pay it all back, they'd then charge an extra percentage on top over the corresponding months?

[Tesla]

Out of interest, I had already been using Clearscore, and i have a score of 439 out of 700..... I have just done my Experian score, and that's at 995 out of 999, So i'm not quite sure where the discrepancy lies between those two scores....and the Money Saving Expert "affordability checker" says it's "good" for Credit cards, and "fair" for loans.... whatever that means.

[hardtailstar]

I always thought Aqua is one of those ones they give you easily but then charge £££ for any uses? Happy to be wrong mind.

 

Okay, so example, if i took out a credit card today, and spent £300 quid on.... ooo I dunno, let's say a Nintendo Switch, with the 0% 24 months interest deal, i could pay back say...£100 a month for the next 3 months as that is still within the 0% period?

 

...Whereas if that 0% period had expired, I'd have to pay that £300 before the billing month was over, and if I didn't pay it all back, they'd then charge an extra percentage on top over the corresponding months?

 

If you had a card with 0% for three months and pay off £100 a month for three months, you are correct you pay 0% on the £300.

 

If you paid £50 for 6 months then you would pay 0% on the first three months of £50 and 3 months of % on the £50 paid each month.

 

so if your card was 17% after the 0% three months then you would actually pay back £25.50 over the three months at 17% so in total you would pay £325.50

Edited June 6, 2017 by hardtailstar

[Tesla]

If you had a card with 0% for three months and pay off £100 a month for three months, you are correct you pay 0% on the £300.

 

If you paid £50 for 6 months then you would pay 0% on the first three months of £50 and 3 months of % on the £50 paid each month.

 

so if your card was 17% after the 0% three months then you would actually pay back £25.50 over the three months at 17% so in total you would pay £325.50

And if I did it that way with the extra percentage (this is all theory to help me understand), would it affect my credit score?

[elsiegee40]

And if I did it that way with the extra percentage (this is all theory to help me understand), would it affect my credit score?

You only do this kind of thing if you haven't been paying off in full in the first place. So your score is already affected

[Tesla]

You only do this kind of thing if you haven't been paying off in full in the first place. So your score is already affected

I may if missed a step here... But how? Because I didn't pay it all in the first month? (theoretically)

[elsiegee40]

I may if missed a step here... But how? Because I didn't pay it all in the first month? (theoretically)

 

You only transfer balance to another card to reduce the amount of interest you have to pay on it.

 

To have a balance to transfer you cannot have paid it off in the first month. Therefore your credit score is already affected.

 

If you do as witch, John and I do and pay off in full every month you won't ever get involved with balance transfer.

[Tesla]

You only transfer balance to another card to reduce the amount of interest you have to pay on it.

 

To have a balance to transfer you cannot have paid it off in the first month. Therefore your credit score is already affected.

 

If you do as witch, John and I do and pay off in full every month you won't ever get involved with balance transfer.

So what's the advantage of the cards that offer 0%for the first 24 months??? I don't get what it's 0% of if I can't pay it back gradually month by month during that period

 

I apologise if I'm being silly here, I just want to make sure I know what I may be getting into

[elsiegee40]

So what's the advantage of the cards that offer 0%for the first 24 months??? I don't get what it's 0% of if I can't pay it back gradually month by month during that period

 

I apologise if I'm being silly here, I just want to make sure I know what I may be getting into

 

They're trying to suck you into a cycle of spending more than you can afford. Looks good if you have no intention of paying it off straight away. They make their money from the interest you pay. People get into the habit and debt then end up paying interest when the 0% runs out.

 

If you are intending to pay it off straight away then ignore those and look for deals that give you benefits that you will actually use.

eg

- cashback

- clubcard points

- john lewis vouchers

- good exchange rates abroad

 

The money saving expert website will give you the low down on which cards are best for what.

 

We have three

- a John Lewis card that we use in the UK which gives us JL vouchers

- a CapitalOne card which is cheaper to use abroad (we travel a lot)

- a legacy Barclaycard that we hardly ever use, but if we ever have a purchase we need to go through without being blocked as unusual that one always works. That's also why we hardly ever use it - unusual transactions don't get picked up on that card!

Edited June 6, 2017 by elsiegee40

[psydii]

If you have a mortgage and no other debt, and you haven't missed any payments, then your credit score should be just fine and doesn't need improving.

 

Put your money into savings.

 

Assuming your income is within normal edutech bounds, in your situation the only benefit of a credit card would be additional protection on purchases.

(Or loyalty rewards like the JL example above)

 

You should save up for the purchase, use the credit card to make the transaction then pay it off immediately. You ten get the best of both worlds and avoid paying £10's if not £100's a month in interest.

[MatthewL]

I was recommended to get one 10 years ago when I was looking for a house as I had no credit rating, this was with Halifax, 10 years later I still have one and never changed it.

 

I started off with I think £1000 and now its £5200 available which I don't go anywhere near. I use it for large purchases or for protection. I've put £50k through mine and incurred repayment cover and interest charges of about £600 in that 10 years which I don't think is bad. I clear more than the minimum off or totally clear it each month but some months I don't have the cash and have to use it to live and clear so much. It's not ideal but living on my own its my backup method for when things go wrong i.e. the car like it did on Friday.

 

Think my interest rate is 1.5% a month or 20% a year. There are probably other deals but I haven't looked.

 

If you don't need one don't get one, I did go through a spell where I went a bit mad on it but now its just a safety net.

[XiJ]

They keep putting my limit UP! We have a cash back one, use it for EVERYTHING and pay it off every month. (We're supposed to pay it off as it goes on - but that doesn't always happen - always at the end of the month though)

 

So we get .5 to 1% cash back on everything. Not a huge amount but better than nowt.

[witch]

@Tesla

Don't get tangled up in thinking about paying off bits and pieces at 0% interest. You aren't getting a credit card for that.

Just go with those of us who say get one, get the rewards, and pay it off every month. @john does a DD so that he doesn't have to remember to do it.

[Tesla]

It seems silly to a point to have a card with a 0% interest offer and not take advantage of it in the time frame (if my understanding of how it works is correct, don't think anyone's clarified that for me yet ), I am generally very good with managing my money, so it's not like i'd go overboard and spend beyond my means (think i've only ever gone overdrawn 3 times, and only once had to pay a fee on that). There's a couple of purchases i'd like to get for the summer, but due to puppy (yes, i know, my choice, etc), may not be an viable option unless I have a card nlike the one i've seen on tesco (0% Interest for 30 months) (and we use clubcard points etc anyway)

 

Having said that, I am grateful for all the advice and am taking it all in consideration, mind.

[HTCPCP]

I have the Nationwide one - if you travel, then it can be really useful. Limit is 1k I think (although I never go anywhere near that!), but has the advantage it builds up commission free foreign exchange credit. This means, when I go to another country, I can use my card without getting stung with foreign exchange commission.

 

It's always worth while going into your bank and speaking to one of their advisers, mine was brilliant, and went through it all with me, and even went through some of the other cards I was looking at too (capital one, Tesco etc). Yes, they will be biassed towards promoting their own card, but a good adviser will also point out risks and benefits of cards, and go through all questions.

[witch]

If you are sure you can pay it off before the o% offer finishes, then that's fine.

[JJonas]

There is nothing wrong with taking a 0% deal, just make sure the balance is £0 by the time the deal ends. Also I don't believe the 0% interest applies if you use the card to withdraw money from a cash-point.

[Tesla]

What's the minimum payment each month roughly? Is it a generally a percentage of what is owed, or is it just a set lower limit?

[sted]

What's the minimum payment each month roughly? Is it a generally a percentage of what is owed, or is it just a set lower limit?

 

iirc its usually 10% or something like £5 depends on the card

 

as to 0% in theory its fine in practice its only fine if you remember and dont expect any warnings and the way they do it can be a pita. I used one credit card to part pay for a car (because i knew i was getting another to transfer the balance to and thought it would be handy to not pay it off for a while (had the cash but meant i had less reserves than id like) i then started using that card as normal and paying off that new stuff but it diddnt work like that and i got charged interest on the new stuff and in the end had to pay off the whole lot to stop getting charged interest on what id thought was interest free