Credit Cards – Extras
There are a number of factors that you should take into consideration when comparing credit cards from a range of different providers. You will need to look at, and consider, any introductory offers proffered by the credit card company, as well as the benefits offered by a product on a regular basis. You should weigh up the pros of the introductory offers against what could be cons in terms of high APR’s and rates of interest.
Balance Transfers
If you are applying for a UK credit card for the first time, or if you are transferring credit cards but have no outstanding balance due, then this will not be a consideration for you. If, however, you are intending to pass on a balance from a previous balance then credit card balance transfers will be a prime consideration for you.
You may be offered special introductory or ‘teaser’ rates on credit card balance transfers, but do not forget to check what interest you will be charged on your balance transfer once the introductory period has run out. If you are not planning to pay off your full balance before the introductory period is over then you will need to consider whether your card provider is offering a good deal afterwards. Also, be sure to check out any introductory offers in full before signing up. Introductory APRs can apply to Balance Transfers or purchases, or both, so make sure you find out what’s what.
You do not need to take out a new credit card in order to make a Balance Transfer however, nor do transfers have to be made from credit card to credit card. Balance Transfers can often be made from bank accounts, store cards and loans and can be moved to an existing credit card. Often you can make a Balance Transfer onto a credit card at any point as long as you have the amount available to you in your credit limit. You should note however that these transfers may not be subject to introductory offers and so will have the same level of interest as if you had made a purchase. Check with your provider for further details.
As far as payments go, until your receive a credit card statement from your new credit card which shows the Balance Transfer on it, you should continue to make payments to your old lender in order to ensure you don’t receive any late payment charges. It is also important to remember that whilst you may not be charged any interest on the Balance Transfer you must continue to make payments to the debt.
Interest Free Periods
Every credit card will offer Interest Free Periods of different lengths. During this period you will be able to pay off your credit card balance without incurring any interest. The interest free period is a great means of using your credit card without incurring any charges, and is a good way to stay in control of your spending.
There are different types of Interest Free Periods, those which are a permanent feature of the credit card and those which are special introductory offers. Introductory offers can include no interest on balance transfers or no interest on new purchases for between 3 and 12 months. You should be aware of how much interest you will be paying once the Interest Free Period ends and ensure that you are getting a good rate of APR. Certain transactions too such as cash withdrawals and credit card cheques will also not be exempt from the no interest clause and interest may be charged immediately.
Many credit cards have Interest Free Periods as a permanent feature however and they often last between 40 and 55 days. When your statement is sent, if you pay off your balance in full before the due date you will incur no interest charges. If however you leave some of the balance outstanding you will incur interest on this amount.
Rewards
Many credit cards today come with a number of bonus schemes such as air miles, cash back or store points. Whilst many of these schemes sound very tempting, it often happens that you need to spend a huge amount on your credit card before you reap any of the rewards on offer. If you are considering applying for such a credit card it might be worth taking the time out to do the maths and work out exactly what you would need to spend in order to get something back. It is only in this way that you can discern whether or not you are getting a good deal.
Many of the cards which offer these Rewards often have higher rates of interest than their counterparts and arguably, these Reward Credit Cards are only beneficial to those who pay off their balance every month. If you intend to carry a balance over on your credit card, it is worthwhile working out if what you are charged in interest outweighs what you will reap in terms of rewards.
If you chose not to collect air miles to spend on flights and holidays, points on pounds spent to put towards shopping vouchers or cash back you may decide to take up the new trend of charity credit cards or donation cards. Donation cards are a great way to donate money to your chosen charity while you spend as the charity receives a percentage of what you spend from the credit card provider – costing you nothing.
Withdrawal Charges
When you use your credit card in order to obtain cash from an ATM it is considerably more expensive than if you did the same from your regular bank account or debit card. Credit card cash withdrawals, known as cash advances, will accrue interest charges so be sure to check this out when considering a credit card. The interest rate charged for cash advances is usually considerably higher than that for purchases or balance transfers. With cash advances there is no interest free period, making the interest rate even more of a pertinent issue. Often however lenders have promotional offers in which they have very low interest rates on cash advances – sometimes even as low as 0%.
The interest rate isn’t the only thing to be wary of however with many lenders charging a set fee every time you use your credit card to withdraw cash. This is on top of the interest you pay meaning that withdrawing cash on your credit card can be a costly business. You may also find that there is a limit placed on the amount of cash you can withdraw in one day even if you have the funds available within your credit limit. This is merely a security feature and ensures that if your card is lost or stolen it cannot be fraudulently used to withdraw cash and max out your card.
If you are planning to use your card for cash withdrawals whilst travelling abroad, or just as an emergency resource, then this will be an important factor for you when choosing a card. Many companies charge you a set fee of the amount you withdraw for taking money out abroad as well as the charge for withdrawing cash and interest. This means that when withdrawing cash abroad you are often hit by 3 separate charges. Certain lenders do however offer low levels on charges for taking money out abroad and some even have no charges – shop around for your credit card therefore if you want to use your card to withdraw money abroad.
