credit cards

[Kinvig]

I know tha it's adviseable to use them for online processes and that they're good for your credit rating.....but that's about it.

I don't have a clue.

Thinking I'll need one for my bike trip next year - as most places won't have heard of Maestro!


What exactly do credit cards do? Do I open an account like a bank account & transfer money over? Do I get interest on my savings?


Recomemend me one!

[gettin2dizzy]

You can get a debit Visa too. That's what I use instead.

[Kinvig]

You can get a debit Visa too. That's what I use instead.

hmm, one of my cards in my wallet that I never use has one of those.

[timwilky]

What do credit cards do.

1) they have the potential to get you into serious financial ****.

When to use them. For any transaction where you would rather not be handing your own money over. Therefore the contract for purchase is between the CC company and supplier. You in turn have a contract with the CC company.

No goods/faluty goods etc. Your contract is with the CC company and they have to make good.

I know it is daft, but I cannot see how owning a CC can improve your credit rating. My lad was advised to get on before he applied for a mortgage. OK it proves to the financial world that you can manage to acquire debt and fund it. But would a healthy bank/building society account not equally show that you know how to manage money without acquiring debt?.

[the_lone_wolf]

I know it is daft, but I cannot see how owning a CC can improve your credit rating. My lad was advised to get on before he applied for a mortgage. OK it proves to the financial world that you can manage to acquire debt and fund it. But would a healthy bank/building society account not equally show that you know how to manage money without acquiring debt?.
only if you had an overdraft / loan with the bank or building society, otherwise you're not managing debt, just saving. your credit rating isn't a judge of how good you are at saving money, it's a measure of the risk a lender will take by lending you money, on which they make a choice whether to give you credit or not

tbh, properly managed, credit cards are a good thing, i've earnt over £100 in cashback from my morgan stanley card in the last year, i pay my bil off in full each month and have the protection of buying with a CC should something go wrong...

[Alpinestarhero]

I think my parents have a mastercard for going abroad, they only use it for abroad and also for purchases in an emergency (e.g. if the fridge blows up) so they dont get into trouble with money.

Credit cards are great, as long as you remember you have to pay back what you use...so only sped what you can afford!

Matt

[G]

I only spend on my credit card what is available in my other accounts as a rule.

They are great protection in this day and age against card fraud.

If you get fraudulent transactions on a debit card your stuffed, your money is gone end of story.

If you get fraudulent transactions on a credit card then you generally 99% of the time your covered and the problem sorted trouble free.

All my accounts are with Alliance & Leicester, credit card is with Alliance & Leicester through MBNA.

Good service everytime with A&L, easy to use phone service to get most info you will ever, and if you just want to speak to someone then you press 9 and wait no more than 5 minutes........ALL english call centre staff aswell.

Good online service aswell.

[drefraser]

Check out www.moneysupermarket.com to compare interest rates and fees.
And if you want to read lots of financial stuff in the least dull format out there check www.fool.co.uk
I use Egg myself.

[MiniMatt]

To answer the question, a credit card is kind of like a bank account that can only ever be at zero or in negative. Ok, so technically you could have a positive balance but no, you won't get interest on it (or if you do it'll be 0.0001% or something).

You use it to buy something, you then have a period of time, 30/40 days where that debt is interest free. At the end of the interest free period you pay it off, via a transfer from your current account etc, and bingo, you've just gotten and paid off a short term interest free loan. If you don't pay it off however, the negative balance rolls over and starts accruing a frightening rate of interest, 15-20% is usual. So if you don't pay it all off every month your interest free loan has now become a very expensive loan.

So, credit cards are great if you're going to be paying them off every month, but if you need to borrow money then a regular loan is much better bet. The problem comes as people generally are weak and get into the mindset of thinking it's free money. Their current account is running dry and so just slap their next purchase on the credit card and start accumulating a debt that is hard to pay off whilst attracting scary interest rates.

If you're strong willed enough to know that you'll pay it off on time all the time then all credit cards are much the same, some are going to offer air miles or tiger tokens or god knows but they're all much the same. In this case the most important thing is the ease with which you can pay it off each month. As such a credit card with your current bank might be easiest, First Direct for example, not the best interest rates in the world, but it's easy just phoning them up and saying "can I pay off my card please", "sure, that's done for you anything else?", "no thanks, bye".

If you think you might be weak. And we all are. And yes, I got into serious credit card difficulties as a young'un which took a good five years to pay off. In this case an American Express card might be an idea. With these you have to pay them off in full every month, no choice, if you don't they stop the card. Obviously they have to make their money somehow, so as you're not going to be paying any interest you pay a yearly fee (think it's about £50 for the green one). Amex do classic credit cards as described above now as well as their regular cards (which aren't credit cards as such) so double check what you're getting.

[thor]

I have a credit card that pays me 1% on all purchases. It's free money FFS!

[drefraser]

I agree with most of what MiniMatt said but usually the lowest interest rate cards don't have any interest free period. Also if you have online banking or choose an online credit card (like Egg) you can set up an automatic payment of the full amount every month. It depends where you go but American Excess is not very popular in loads of countries so Visa might be better. Likewise if you try to use Visa Debit abroad some places it will work and some it wont.
As has been said; if you can't pay it off don't put it on your plastic. It's the most expensive way to be in debt.

[Kinvig]

I went to Halifax & they said interest free till 2009. They wanted me to sign there & then. I declined saying that I wanted to hear what Shyte West had to offer. They said they were better than Shyte West.

Went to Shyte West & they said loads of stuff that not having had a card went right over my head. They then told me that they were better than Halifax & wanted me to sign there & then.

They reminded me of the phones 4 u place - last month I went in for a brochure - they didn't have any & they then attempted to get me to sign up on a 15 month deal!!!!

[Nutter]

I agree with most of what MiniMatt said but usually the lowest interest rate cards don't have any interest free period.

Really? Wow. I've never come across a card like that before. With all the ones I've had (and currently have), if you pay the account off in full within 30(ish) days of the statement there is no interest. You only pay interest after that. Worth remembering that when/if I'm looking for a different credit card.

[drefraser]

I went to Halifax & they said interest free till 2009. They wanted me to sign there & then. I declined saying that I wanted to hear what Shyte West had to offer. They said they were better than Shyte West.

Went to Shyte West & they said loads of stuff that not having had a card went right over my head. They then told me that they were better than Halifax & wanted me to sign there & then.

They reminded me of the phones 4 u place - last month I went in for a brochure - they didn't have any & they then attempted to get me to sign up on a 15 month deal!!!!

That's why it pays to do independent research. The links for the motley fool and money supermarket are good for that. If you can't face doing the research I'd recommend NOT going to any high street provider. Your fees pay for their nice buildings and all the staff in them.

[fizzwheel]

What exactly do credit cards do?

Allow you to get into debt easily and quickly.

Recomemend me one!

Dont get one, unless you can afford to pay off the balance at the end of each month so thats its back to zero.

[chris8886]

Dont get one, unless you can afford to pay off the balance at the end of each month so thats its back to zero.

too true. all i do with mine is use once a month or so and pay it off immediately and it helps my credit rating a bit, for when i come to get a mortgage etc.

as has been said just make sure you always pay the whole balance immediately because cc companies charge a ridiculously high amount of interest!!