It's Payback Time!! (Credit Cards in general)

Member Name: marandina

Product:	Credit Cards in general
Date:	21/03/02 (648 review reads)
Rating:

Advantages: Can make money to save towards something

Disadvantages: You may get carried away

Oh well...time to be sensible just for few minutes and try to re-establish some credibility. So, as a partial appeasement to the lovely Sue M, I thought I’d return to the safer ground of consumer finance (one of my passions, sadly).

Post Christmas it's easy to stick everything onto your flexible friend but how can you turn this into a money making proposition? Well, here's how...

Just before we look at the methodology, a few basics on Credit cards.

***What the hell's a credit card?***
Credit cards have been with us for years and amount to an extension of credit to those that need it (and even those that don't). Their ease of use means that the credit card market is almost at saturation point. There are literally thousands of different versions ranging from your favourite football team's to registered charities like the RSPCA.

They've had a lot of bad press in the past due to stories of massive overspending causing severe financial problems for some unfortunate souls. Bear in mind though, that it's the people using the card that get themselves into trouble and not the card itself.

In essence, a credit card is usually a plastic card, which enables the user to buy items and, effectively, put it on a tab. Try not to be put off by the heart rendering stories in the media of folks digging financial holes bigger then the Grand Canyon for themselves. After all, the card doesn't drag you out and make you spend but,if in any doubt, then stick to "pay as you go" like Switch and Solo (both methods rely on you having the money to pay almost immediately rather than deferring payment until later).

***How does one use it?***
You can present the card in shops; quote the visa number over the telephone; even key the visa number in over the Internet. On each occasion, the retailer will sell you the goods (you will probably need a bit more info when not dealing face to face e
.g. card issue number, exact name appearing on the card and expiry date). Of course, this makes spending easy so if you want to buy that new jungle for your pet Giraffe or even a make up pressie for your favourite Community Guide then it simpler doesn't get any easier than this (say, raw meat for Keith?).

***What can go wrong?***
When you apply initially, you'll be given a credit limit i.e. a maximum amount that you can take your tab up to. If you subsequently, exceed this limit then be prepared for interest charges and maybe even fees. One of the criticisms of credit cards is that the limit is revised upwards without the borrowers consent. This can lead to temptation when spending gets out of control. If you do get letters arbitrarily putting your limit up then give the Company a call and tell 'em to put it down again, pronto!

You may be the victim of fraud (sadly, all too common). Don't panic...as long as you haven't been negligent e.g. left your PIN daubed all over the front of your Credit Card or left notes lying around everywhere with the number on then the procedure is like any other theft. Report it to the police immediately and get in touch with the Credit Card issuer to make a claim. Most are pretty sympathetic as it's a problem that is still being researched for an answer(there are solutions on the way such as fingerprint recognition etc that are being worked on so that there is no longer the reliance on signatures that are all too easy to copy).

***When do I pay?***
Once you've used it then a bill will be sent out usually the month following the transaction. Effectively, you are deferring payment. The number of days to pay will vary from card to card but most will be something like up to 56 days. This means that you are borrowing interest free during this time and as long as you pay by the deadline given you will not incur interest charges.

***What’s the difference between a ba
lance transfer and a purchase?***
*Credit card companies make their money from people that don’t pay their bills in full. Balance transfers are amounts brought across from one credit card to another. These usually have attractive rates to persuade customers to switch allegiance. Interest charged on purchases can be different to balance transfers and is the interest calculated on outstanding bills not settled in full and based on the total of the purchases during the period concerned.

***So where's the credit card paying gig?***
An innovation around out the moment is the cashback concept. This means that when you put items onto your visa bill a cashback is calculated on the tab that you run up and paid annually. The 2 most obvious schemes on the high street are available through Alliance and Leicester PLC and Halifax PLC. **A+ L pays 0.5% on the first £4000 of your annual spend and 1% thereafter. Their Moneyback Mastercard/Visa charges an introductory rate of 3.7% on balance transfers reverting to 17.4% normal rate on purchases. The alternative for those interested in a longer term balance transfer deal is the Diamond Mastercard/Visa at 6.8% introductory rate and normal at 13.8%.

An even better deal is now available at Halifax PLC – a cashback of 1% is available on any spending after the first £500. There's also a special deal on at the moment of 0% for the first 5 months on both balance transfers and purchases. The normal rate at the end of the free period is 17.9% for Classic cards and 16.9% for Gold and Platinum.

This means that say you spend £5000 during the year then you would get a cashback of £47.50. Balances outstanding on your existing card can be transferred across but you would probably only want to do this if you planned to clear it within the 5 month introductory period. At the moment is doesn’t matter due to the 0% deal but bear in mind the implications of what’s outstanding and for pot
entially how long when bringing balances across.. The interest free period is a generous up to 59 days and no annual fee.

***What are others paying?***
The main player in the market is Barclaycard. They are offering an introductory rate of 6.9% reverting to 17.9% normal rate. There is currently no cashback version available although a profile points scheme does allow you to accrue points. These can be spent on special deals offered in conjunction with the card.

Abbey National is offering 7.9% introductory rate with 0% available for balance transfers reverting to 15.9% normal rate.

If you want to deal exclusively over the net then Egg are charging 0% on both balance transfer and purchases for the first 6 months after which the standard rate of 12.9% applies. There is a cashback of 0.5% available and no annual fee applies. I’m not sure of the exact details of the cashback so you’d need to check that out.

There are plenty of cards around and my best recommendation is to have a look at a good money website like Moneyextra.com. which will compare the latest deals for you.

***So what do I do?***
If you have credit cards already then you'll need to consider the way that you are using them. If you don't clear the balance each month in full then cashback may not be for you. (If this IS you then look into consolidating your outstanding bill onto a personal loan – you could HALVE your interest payments). If, on the other hand, you are one of the 50% that can pay in full then cashback is a real must. The beauty of it is that you're not restricted to spending your hard-earned gains in schemes that don't have anything of interest to you. A lump sum credited around Christmas time can come in very handy. Applying is easy. You can call into your nearest bank; telephone them or visit the relevant website.

Other benefits of using a credit card include insurance against theft or damage to i
tems bought with the card. Free travel accident insurance is common and even give-aways if you are in the right place at the right time (even mobile phones are given away to encourage people to apply).

Credit cards are so common now that it's usual to find most people have more than one. Don't allow them to just sit in your wallet doing nothing. Get them working for you and a great way is through cashback.

****Tips when applying for a credit card****

 Make sure you know you're gross annual income. The more it is, the better version of the card you get along with the requisite benefits.
 If you are in precarious employment consider protecting your balance. This will cost you (usually about 78p for every £100 outstanding on a bill) but could work out in the long run if you lose your job.
 The Halifax and Egg cards offer a guarantee against fraudulent use via the Internet. Look for this if you are planning to make purchases via your PC.
 When you get your card bear in mind that you can revise your credit limit DOWN as well as up if you are worried about being overly tempted.

I’ve included the interest rates and deal terms as a guide to give the reader an idea as to what to look out for. With so many deals on offer I strongly recommend that you check out the web comparators which are usually up to date as mentioned earlier.

I hope that one or two folks find this useful and if you can take advantage of cashback then it really is an easy earner.

Hope I'm forgiven now for casting you as Thelma or Louise (do you know I've never actually seen the film?), Sue?

Thanks for reading ~ marandina (I’m off for a lie down now)

Note ~ The rates and details were correct at the time of writing. I cannot be responsible for any financial decisions made as a result of this article.


*Beware credit cards cheques that profess to ma
ke it easy to dip into your credit facility or transfer balances from other cards etc. They don’t always make it clear that they attract a charge and interest on the outstanding balance. Credit card cheques look like any other normal cheque but post a debit to your credit card (if that makes sense?)

**I’ve heard a rumour that A + L’s threshold has now been put up to 0.5% on the first £20000 although I can’t confirm this.


p.s. Keith (Alkaliguru) doesn't eat raw meat really, just lot's of soft ice-cream cooked to his own inimitable recipe

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