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Improve Credit RatingThings To Know Before Taking Out A Credit Card!

By James Shaw

As many customers enjoy getting free credit by switching or moving there debts to 0% interest offer, Many are still stuck in debt, in fact as a nation we owe an unbelievable £1 trillion in personal debt alone. So although having a credit card can be a huge help and prove very useful they can also lead many people into huge debts. You can use our guide below which will help you make the most of your credit card.

Balance Transfers

When opening a new credit card account account there a few things you must keep in mind, because there are so many offer on the market you must concider your current debt and keep in mind you own needs.

If you dont owe a huge amount on your credit cards and can pay them off within the interest free period then a 0% balance transfer card woukd probably be best for you, however transfering a large amount then a low rate card for the life of the balance would probably save you money in the long run.

Compare The best balance transfer credit cards

New Purchases Credit Cards

Sometimes it can work out better to take out a second credit card for new purchases this way they won't be included in your balance transfer card rate. Getting a crad that offers you a fixed low rate on purchases will save you money, because your card for balance transfers will pay off your debt, meaning that you won’t have contribute to new purchases.

You must careful though, as this will only work well with sensible usage and not increasing your personal debt. Credit cards are a very expensive form of borrowing and you need to have a good payment plan to keep on top of it.

Compare the best 0% on purchases credit cards

Low Standard Rate Credit Cards

If you find it hard keeping updated with rates and switching accounts then you'll probably find it more simple and easier to go for a low standard rate card with the lowest typical APR such as the Virgin Credit Card or the Egg Card.

Fee's And Charges

Most credit cards if not all now charge a fee for balance transfers. These are either a Set fee or a percentage of the balance being transfered. Although you have to pay a fee, it has led to providers offering longer interest free periods, so even if you have to pay £50 to transfer your balance, you will save it due to the free interest.

But remember that if you have a large debt, you need to be careful with percentage fees, because a 3% interest fee on £7,000 would cost you £210.

Again, a lot depends on the size of your balance and the length of time that it will take you to pay it off so think carefully before choosing your card.

Paying Off Your Credit Cards With A Loan

While many customers tend to shift there credit card balance around between interest free offers, there are still a number of issues that should be considered. If you own lots of credit cards and are only paying the minimum each month, this is look at badly by most credit reference agencies, and you now have to pay to do this.

Also, 0% balance transfers should not be relied upon. If you’re one of the many people who move their balance every six months to avoid paying it off, you will be leaving a trail of credit cards behind you and could find that new cards will no longer take you. So it might be time to finally pay that debt off.

A loan offers a long-term structured method of paying off a debt that might have been lurking around for years �?and rates are much cheaper than credit cards.

Withdrawing Cash Is Never Free

Withdrawing cash from a ATM cashmachine is never free, even if you pay off your balance every month to avoid paying interest. Even if you have a 0% interest on new purchases card you will still be charged interest when you withdraw cash from an ATM machine, and the interest will start as soon as you withdraw money from the ATM.

Make sure that you’re aware of all the exclusions applied by your card so that you don’t get caught out with unexpected charges.

Pre Pay Credit Cards

Pre Pay credit cards are great new card, and are made to suit young people and those that may not be able to get credit due to bad credit history. They are handy as you can only use them when you have the funds to top them up so there's no getting into any unwanted debt. Pre pay cards are easy to top up, most shops these have pay points where they can be topped up, you can even top them up online or even over the phone. They are a great way of keeping track of your spending.

While these cards mean that you can’t overspend, they do cost a lot. There are fees for opening the card, a monthly maintenance fee, transaction and loading fees and charges for using ATMs and for using your card abroad. These charges can take out as much as £5 for every £100 that you spend.

However, despite these charges, pre-pay cards are good for people who are bad with money �?or for giving to teenagers, for example.

Improve Your Credit History

Taking out a credit card can help you to build up your credit score. Having no history of borrowing money and paying it back can stand against you when you try to get a mortgage. So opening a credit card, even if you don’t use it much, is better than having savings and no credit history.

If, however, you already have a poor credit rating, with CCJs and defaulted payments, then you need to repay your outstanding debts before you can work on you credit rating.

Once you’ve done this, you could take out a card designed for people with poor credit. While the interest rates are extremely high �?more than 50 per cent in some cases, to reflect the risk they are taking with you �? if you use it sensibly and stay on top of repayments you can rebuild your credit score.

Click here to view Cards to Build your credit rating

About Cashback Credit Cards

Credit cards that offer cash back on purchases and other rewards can be great �?but make sure that you pay the maximum balance off each month as the interest is always more than the reward.

Make sure you know whether the interest on purchases is accrued at the end of the month or from the time that the payment is made.

These can be good if you’re disciplined, as you will incur little or no interest and can gain benefits such as air miles. But you will need to spend big. For example you would need to spend around £50,000 to earn enough air miles to get to New York and back with Amex. On the other hand, it wouldn’t take too long to build up enough for a European trip.

These reward packages can be very tempting but you need to be careful not to end up with a bad deal for the sake of a reward scheme. Or ending up overspending, and incurring interest, just to get more air miles, or cash back.

Stay On Top Of Credit Card Payments

If you’re late on your payments then you will be fined up to £12 (this was capped earlier this year by the OFT). While this might not seem like much, you also need to consider the damage you will be doing to your credit rating.

Setting up a direct debit to pay the minimum amount will save you from late payment fees and the detrimental effect on your credit score.

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