Credit Card Guide

Published on 13 July 2012 by Raffick Marday

Guide to using Credit Cards

Credit cards let you borrow money and pay it back in monthly payment plan or in one go depending on the card. There is usually a minimum payment of £5 or minimum percentage of your balance, at around 2% or 3% but it is mainly down to you how much you pay back each time.

Credit card guide making The Right Choice. Want a card, but not any card!

Everyone likes to make their own choices, but there are so many plastic cards to choose from how do you know that the one you picked is right for your needs? Before you get a card you should know the difference between the various types of cards currently available on the market.

Credit Card

Credit cards let you borrow money and pay it back in monthly payment plan or in one go depending on the card. There is usually a minimum payment of £5 or minimum percentage of your balance, at around 2% or 3% but it is mainly down to you how much you pay back each time.

Credit cards let you borrow money and pay it back in monthly payment plan or in one go depending on the card. There is usually a minimum payment of £5 or minimum percentage of your balance, at around 2% or 3% but it is mainly down to you how much you pay back each time.

Debit Card

In most cases a debit card is usually linked to your current account and is an alternative to taking cash out, a debit card is a convienient way of making quick and easy transactions. The transaction shows up on your account almost straight away. You can only spend what you have in your account.

Charge Card

Means you charge purchases to an account and like most cards have a maximum spend limit. Charge cards will give you a monthly statement that needs to be paid off in full. Most Branded issuers charge a membership fee.

Prepaid card

It is like a debit card but not linked to your bank account. You load money on to the card and an alternative to taking cash out, a prepaid card is a convienient way of making quick and easy transactions. The transaction shows up on your account almost straight away. You can only spend what you have in your account.

Store Card

Most large retail chains have store cards and you will probably have been offered one of these while out shopping at one point or another. They are a branded credit card offered by a retailer. It is to restrict where you can spend. Relatively easy to get, but they charge high rates of interest on balances so check the terms and conditions before you get one.

Charity Card and Affinity Card

These are for people who want to help a particular charity. Money goes to the charity when you first open an account and in most cases a small percentage every time you spend on your card.

Cashback Card

They will pay you money for spending on them. But be sure to check the terms and conditions as some cashback card if you do not pay off full balance every month, the interest goes sky high.

Spend or mend?

There are two common reasons for getting Plastic card. One of these is to make purchases. With busy and fast-paced lives, most of us are rushed off our feet and don’t have time to keep nipping to the bank. By pulling out the plastic and tapping in your pin number when you shop at supermarkets can make weekly shops quicker and more convenient. No trying to find a cashpoint that doesn’t charge you to take out your money and no counting out notes with the worry you may lose your well earned money or get robbed. No worrying about getting the correct change and carrying a pocket / purse full of change.

The other reason is to mend your balance, by transferring any existing debt into one place which can make it easier to manage and in some cases can save you money by taking advantage of lower interest rates.

You can also take out cash advances, which is handy for seasonal periods but please be aware that the rates can be very high and rarely offer an introductory period so check the terms and conditions before you do this.

Most banks and branded card companies also offer credit card cheques, which can be used to pay bills, or so you can make postal purchases, which can be handy for businesses monitoring cash flow.

Whatever you use the card for, you will have to pay back a minimum amount per month, either a lump sum or a percentage of your balance. A credit limit will also be agreed between you and your branded provider unless it is a prepaid card and will largely depend on your salary and outstanding debt and your personal circumstances,

Note: Missing credit card payments can cost you £20 or more and going over your credit limit can also result in fines.

Note: Cash Advance. Bear in mind that although this is a quick way to get cash straight away the interest can be quite high and you are also charged a fee for taking the cash out in the first place.

Note: Credit Card Cheques. These are often charged at your usual rate, but in some cases interest starts building straight away once debited from your account and there could also be a handling fee.

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