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Cost of borrowing on credit cards

Credit Cards are a conventional method of borrowing money. Not only can you borrow on them, they are a great method of spreading the cost of purchases if you can’t afford to pay for something in full. However, with hundreds of different cards how do you choose the correct one?

You may be thinking what is the best card for me? There is not a single credit card that is perfect to the individual. When applying you need to think about what you would use the card for, as this will help you determine the best card for you.

Top tips to think about when taking out a credit card:

  • When possible, try and pay off more than the minimum payment as the interest will accumulate and you will end up paying a considerable amount more than you borrowed over time.
  • It’s a good idea to pay your credit card payments by direct debit, this way you will always pay on time and not receive a late payment fee.
  • Keep an eye on your spending; make sure you don’t go outside your agreed limit.
  • Try not to withdraw from cash machines as you can be charged a higher rate of interest and incur with drawl charges.

Some advantages and disadvantages of credit cards:

Advantages

  • Credit cards offer a safe and convenient way to pay for goods and services both in the UK and abroad, particularly if you are purchasing over the internet, phone or by mail order.
  • Free, short-term credit- as long as you always pay your balance in full by the due date shown on your statement.
  • Purchase protection - under Section 75 of the 1974 Consumer Credit Act card issuers and retailers take joint responsibility for faulty purchases, If you pay for something with a credit card, valued between £100 and £30,000, that turns out to be faulty or which you do not receive because the company goes bust, you can claim a refund from the card provider.
  • Protection against fraud — if you are the innocent victim of fraud you will not be expected to pay if a criminal uses your card.
  • Incentives for using a card such as loyalty points and cash back, or payments to support a charity.
  • A truly global currency, as credit cards are accepted in virtually every country around the world.

 

Disadvantages

  • The amount you can spend on a credit card is capped so you may not have access to as much money as you expected. Limits of between £300 and £500 are common for those who have never had access to credit before, while those with a good history who have shown that they use cards responsibly are likely to be offered a higher credit limit. That said, because of the credit crunch and rising levels of bad debt, providers are now more cautious about the amount they will lend. So even if you have a good track record with managing credit, you may be offered a significantly lower limit if you apply for a new card.

 

  • You will incur interest if you are unable to repay your balance in full every month. Interest rates vary significantly so if you can’t afford to clear your debt you should look for a card that offers a competitive rate of interest.
  • You may have been mis-sold PPI (Payment Protection Insurance) which is an additional insurance sold to cover you in the unlikely event of an income drop as a result of illness or job loss, (PPI) will cover your loan repayments to make sure you do not default.

 

The best credit cards are constantly changing as they offer different features and banks are often reviewing schemes. Below are the current top 5 credit cards and what they offer:

Card

Balance Transfer Intro

Purchase Intro

Representative APR

Rate

Duration (Months)

Fee

Rate

Duration

(Months)

(Variable)

Barclaycard

Platinum With BT (22 Months)

 

0%

22

2.9%

0%

3

17.9%

Virgin

Balance Transfer Credit Card

 

0%

20

2.99%

0%

3

16.8%

Sainsbury's Credit Card (Nectar Card Holders Only)

 

0%

12

3%

0%

12

16.9%

Virgin

All Round Credit Card

 

0%

16

1.99%

0%

6

15.8%

Virgin

Purchase Credit Card

 

0%

13

2.89%

0%

13

18.9%

 

Credit cards are popular and can be very beneficial, but make sure you can afford the repayments as you can rack up a huge debt, resulting in bad credit rating. If you have bad credit rating then it may affect you in the future as lenders may decline you credit for mortgages or other loans. There are other means of lending such as loans, overdraughts etc, call in to your local bank to find out more about responsible lending which is best suited to you and your needs.  






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Congratulations! You're one step closer to receiving your compensation for mis–sold Payment Protection Insurance.


If all details look OK you will receive a Claim Pack through the post, usually within 48 hours. If there are any issues we need to discuss one of our advisors will call you.


Either way you need to return your Pack as quickly as possible to prevent any delays with your claim!