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Credit Cards
Choosing the right credit card can
often be a tricky and confusing affair if you don't
have perfect credit history. If you've tried applying
through your bank or building society you may have been
rejected if you have bad credit.
Why get a credit card?
There are currently over 40 million payment cards in
use in the UK, with many people having more than one
card. Cards are rapidly taking over from cash as the
favoured means of payment. Cards can pre-book cinema
or theatre tickets by phone, reserve a seat on a shuttle,
give you purchase power in the high street, or from
the comfort of your own home on the net.
If you are looking to borrow money for a short period
of time then credit cards can be a cheap and flexible
option. Allowing you to borrow money as and when you
need it, credit cards can sometimes
offer better value for a smaller amount than personal
loans.
Whilst there is a minimum repayment each month, which
is usually either 3% of your balance or £5 if
higher, it is up to you how much you repay. You can
either meet the minimum repayment or settle the total
outstanding amount. However, if you don’t repay
the borrowed amount you will have to pay interest, which
is usually on the total amount – this can be costly
if your card has a high interest rate.
You may also be charged up to £20 for late payments
or for going over your credit limit.
Many credit card providers now offer
attractive introductory offers such as low interest
rates on balance transfers. For example you may not
pay interest on any transferred balance for the first
six months. However, at the end of this period the interest
rates may rise dramatically – outweighing any
of the benefits of the first six months.
If you do find your credit card balance
getting larger, especially if you own more than one
card, it may be worth consolidating your debts with
a personal loan.
Pros
Credit cards allow you to borrow when
you want and choose how much to repay each month
Offer attractive introductory rates
Cons
Many people find it very easy to overspend and be unable
to make the required repayments, increasing the size
of the debt considerably. |
