Our flexible friends (Credit Cards in general)

Member Name: yackers1

Product:	Credit Cards in general
Date:	02/01/09 (187 review reads)
Rating:

Advantages: Loads - see the review

Disadvantages: Can get you in to trouble if you are not careful

Those of you with a credit card please raise your hand. I bet you are all now frantically reaching for the sky and I assume many of you are raising both your hands and, if by some freak of nature some of you had more hands these would be raised as well as owning multiple credit cards now seems to be the 'norm' as opposed to the exception it used to be.

****Credit card providers****

There are three main types of credit card and these include American Express ("Amex"), Mastercard and Visa.

Whilst are only a few types of credit card there are hundreds of intermediaries and middlemen that sell on the credit product to the end customers. Historically the intermediaries only included the typical financial institutions and high street banks like Barclays, Natwest and the like, although nowadays there are other organisations that have jumped on the bandwagon and provide credit cards, such as supermarkets.

When I was a child the display near the checkout used to consist of sweets and chocolate now all children can do is get an application for a credit card or some other financial product. How times have changed.

****What do the intermediaries do?****

In essence the intermediaries have taken the 'basic' financial product from Amex, Mastercard and Visa and manufactured it to form their own credit card. By having different interest rates, 0% deals, offering discounts on specific products, gifting loyalty points etc the public are presented with a whole range of credit cards to choose from.

In order to complete the marketing exercise the intermediaries have devised a whole range of attractive credit card designs with bright vivid colours and the like in order to entice customers selecting their product over the hundreds available in the market place. Once company has even changed the shape of its card to include a rounded edge as its unique selling point.

****How do I choose the best card?****

With so many intermediaries trying to grab your custom with 'perks' and deals choosing the ideal card can be really difficult.

What is right for one person is likely to be unsuitable for another and everyone's requirements are different. My advice would be to step back and analyse your own financial situation and ask yourself a few questions, such as:

What size limit do I need? Am I going to repay the balance in full at the end of the month or just part of it? Am I going to settle other debts with this card? Am I going to maintain my account online? Am I concerned with loyalty points? What other discounts are being provided? Am I likely to take advantage of these?

The above is not an exhaustive list of questions and there are likely to be many others that you need to consider. I would recommend that you answer these types of questions as honestly as possible as 'bending the truth' may lead to a poor choice and this will only affect you.

Luckily, there are several comparison websites out there that will show you the current products available and the features of those products. A quick Google search will produce hundreds of hits although I have always found moneysupermarket.com, knowyourmoney.co.uk and onlyfinance.com to be very good sites.

****Using the credit cards****

Historically, only larger retailers, restaurants, hotels etc would accept credit cards, however, with the increase in popularity they are now accepted almost everywhere including your local corner shop and even some market stalls.

I used to have an Amex card and I found that some places in the UK would not accept these, using the argument that the handling fees were too high. I never had this problem in other countries whilst on holiday as Amex was accepted everywhere.

****Maintenance of your credit card account****

Most intermediaries provide online accounts allowing you to check everything that is going on with your credit card 24 hours a day, 7 days a week. This feature ensures that you are always on top of your spending and can see exactly where and when your card was used.

The online account provides paperless billing (which is good for the environment), allows you to pay your credit card bill securely over the internet and allows you to request changes to your card, such as increasing the credit limit.

****Security****

Despite the increases in security there are those people that still have fears. The introduction of chip and pin ensures that signatures can't be forged but there is still the real danger that your card may be skimmed, allowing unauthorised spending on your account.

All intermediaries have specialist fraud units and teams that are on hand 24 hours a day to combat this malpractice. If you lose your wallet or have your wallet stolen then credit cards can be cancelled immediately and your account will be frozen.

Even if the card is used before you get a chance to cancel it then you will not be liable for that cost, providing it is an honest claim. I had my card skimmed and the perpetrator managed to charge £120 to the card prior to me realising. I cancelled the card and after a bit of red tape and form filling I was not responsible for the cost.

Most intermediaries offer free insurance on your purchases which is great for online purchasing.

****Horror stories****

There are hundreds of horror stories about misuse of credit cards and how people have racked up thousands and thousands of pounds of debt. There is always a lot of finger pointing in situations like these whereby the credit card provider blames the customer for not being able to control their finances and the customer blaming the credit card company for the high level of credit available and how easy it was to get multiple cards. The responsible provider/responsible borrower is an ongoing argument and could easily be reviewed in its own right.

Never use one credit card to settle another and another credit card to settle that one. It will be a nightmare to keep track of your finances and you are only asking for trouble.

If your spending does go out of control then there are people out there that can help, such as Citizens Advice Bureau and it will be possible to get yourself out of a hole. The main thing is to get help early on and not let the situation escalate to the point where bankruptcy becomes the only viable option. Bankruptcy will lead to issues and problems for many years after you declare yourself bankrupt.

****Conclusion****

Personally, I think that credit cards are fantastic, but then I use them to live on and then settle the balance in full at the end of each month, therefore I am not overly concerned about interest rates or the levels of charges and penalties.

I like the fact that I can look at my spending online and check to ensure that all transactions are valid and that there has been no unauthorised use. Having the ability to settle the statements online is another great benefit and makes owning a credit card a lot easier and hassle free.

I have no issues with the security and know, from previous experience, that I will not be liable for any unauthorised spending and I won't lose out financially if my wallet is stolen.

I do appreciate the irresponsible lending/irresponsible borrowing problems but I think that it is up to the individual to know how much they can spend and what life style they can afford to live. It is not necessary to 'keep up with the Jones' and be materialistic if you do not have the funds to support it.

Summary: The cash replacement with many features