The Credit Card Lowdown

It is over 40 years since credit cards were first launched in the UK, Barclaycard being the first and, at the time the only card, in. Initially the bill having to be paid off in full each month so it was more like a charge card. The credit limit at first was £100.

Today you can choose from over 1,500 credit cards with intense competition among card providers. There are cards to suit users of every description, financial background and with any credit history. Virtually anyone can own a credit card owner these days, making  life more convenient for everyone. A credit card enables you to borrow money for nearly two months without having to pay interest on it. By using your cash wisely in that time you could actually make money at the same time as you’re borrowing it.

The most sensible credit card users pay off their bill in full each month so they’re avoiding any interest charges. Even if you can’t do that there are deals available to enable you to take your credit-free period to much longer than the 50-60 days available as standard. These deals can be 0% interest on purchases lasting for as long as a year, or more prevalent are deals that allow you to transfer an outstanding debt from one card to another and get 0% interest for a year or more. Sadly, there is usually a balance transfer fee of up to 3% attached.

If possible it is really best to use a credit card as a convenience – to buy goods or services with it, and to pay off the balance in full when it’s due. You’ll then have to pay no interest, but you’ll have delayed paymentyou’re your purchase.

Something you won’t get from cash are valuable rights to protect many of your purchases with a credit card. Any purchase you make with a credit card from £100 to £30,000 will give rights under Section 75 of the Consumer Credit Act. It means that when you make a purchase with your credit card, you have a contract with both the vendor and the issuer of the card, and they have equal liability should anything go wrong. Thus, you could take action against either of them to receive compensation if necessary, for example if a company goes bust before you get your goods.

Some cards give you free purchase protection, which covers you against items bought on the card being lost, stolen or damaged with a period of typically 100 days from purchase.

Another benefit some cards offer is price protection. If you see an item after you’ve bought the same at a cheaper price, you can claim back the difference. Claims can be from £10 to £1,000, but may be subject to a small excess. You may also get free extended warranties or different types of travel insurance with your card.

Applying for credit cards is fairly straightforward, but if you’re interested in a balance transfer you’d be wise to plan for it in advance. Card providers will check information held about you by credit reference agencies before approving your card. Your application form must tie up with what’s on your credit history, so there’s no point in exggeration or being “economical with the truth” just to try and get a card.

Tom Smith
10th August 2007