Get The Most Out Of Your Credit Card

Credit cards are like cars in the UK, almost everyone has one. Therefore, in order to get the most out of your credit card it is important to get the card that suits your needs.

As there is plenty of fine print to consider when choosing a credit card, choosing a card that suits your spending habits is paramount.

Put simply, if you do not intend to pay off your credit card balance each month, then the interest rate your card charges becomes vitally important to your finances. If you do intend to clear your balance each month then looking at cards that offer loyalty/reward schemes would be prudent. Also, if you intend on using the plastic when abroad then you should consider choosing a separate card for that purpose alone.

When it comes to how much it will cost you to run a credit card there is more than just the annual percentage rate (APR) to consider as there many other charges you could be subjected to. A good understanding of these charges not only allows you to compare like for like but will save you money In the long run as you will be able to avoid paying any unnecessary charges.

The charges card issuers levy for balance transfers as well as cash advances can vary greatly. Interest free periods for services such as balance transfers and initial purchase vary greatly, also.

Another way credit card companies profit is by apportioning card payments to whatever balance is accruing the lowest rate of interest, thus allowing any other balance(s), such as purchases, to accrue interest at the higher rate, leaving the cardholder with an ever increasing debt to repay.

Nationwide’s executive director Stuart Bernau said: “ Many credit card providers use low introductory rates to lure people into opening an account. Most providers apply repayments to the cheapest debt first making it more expensive for you.”

Using your credit card abroad can cost you more than you originally budgeted for as all but one of the high-street card providers levy an ‘exchange rate administration fee’, which is typically around 2.75%.

“ Credit cards are increasingly popular method of payments and withdrawing cash abroad,” says Lisa Taylor from comparison website, Moneyfacts. “ Many of us do not realise that, when using a credit card abroad, the card issuer adds on a foreign usage loading.

“ This can be as high as 2.75%. That means a consumer spending £1,000 abroad would be charged £27.50. There are, however, a few exceptions, including Nationwide and Saga, who do not charge for usage abroad.

“ In addition, if withdrawing cash overseas, consumers will be charged a cash withdrawal fee, which can be as high as 2.5%. So withdrawing £1,000 could cost you £52.50 in total.”

Alisdair Milton
29th June 2006