Credit card is a rectangular thin sheet of 31/8 x 21/8 inches, issued by a credit card issuer. It carries such information on you as your name, issue and expiry dates, and card number. At the back of it is a security number and a place for you to sign. It has an electronic area that stores your financial data. It now comes with pin number and in some cases chip number to help secure you from being defrauded. Credit cards are used to pay for goods and services purchased by you and to pay bills. Examples are groceries and holidays. It provides a convenient way of shopping and payment. It can aslo protect you. Under Section 75 of the Consumer Credit Act 2006, you can get compensation from both your credit card issuer and the seller of the goods if you purchase goods worth more than $100 and less than $30,000 with your card.
According to statistics in United Kingdom (UK), credit cards have made shopping and life easier for UK shoppers. An average UK resident has a debt of $5,129 per person and holds five (5) different cards. The convenience of being able to shop from home and the ease at which travelers carry money without anybody knowing how much is on them is the merit of credit card. It also avail residents the opportunity to spend money while they do not have. Interest is only paid on purchases so it can serve transactional benefits of holding money. Most UK residents patronize the cards because of their conceptions and in some cases misconceptions of credit cards. The following are six (6) credit card truths worth revealing:
The more transactions you do on your card the better for your credit rating
If you are able to have series of transactions on your credit card and you do not default in credit repayment, the better for your credit rating. It is better you do all your shopping on groceries and other purchases on your card so that they reflect on your credit card statement. The interest you pay on these credit is less than the benefits you get by having a good credit rating. Consider having to buy a house and you do not have good credit rating, how do you get a mortgage? Credit card is not an avenue to lure you into debt as some people will want you to belief. With a little bit of self-discipline, you will not purchase things that are not necessary for you.
Credit cards issuers offered different services
It is good to compare credit cards before you choose one. There are different services offered by different credit card issuers. What you need to consider before deciding on which card issuer to use is not only the Annual Percentage Rate (APR). Check the annual fees of using the card if it has any, check the moratorium or period of grace in which you will not pay interest on purchases, check the credit balance transfer rate, check the penalty for cash withdrawal and your cash limits. All these issues vary from one card issuer to the other and they add up to tell you the best issuer to use. For example, Virgin money has 16.6% APR, MBNA has 15.9 percent APR, Halifax has 15.9 percent APR, Barclaycard Gold has 19.9 percent, Royal Bank of Scotland Platinum card has 16.9 percent. While some issuers offer zero percent transfer fee to their existing customers only, some offer it to all customers.
Number of credit cards
It is better to have few credit cards that you know you will be able to use for purchases than to keep your cards un-used. Some people think it will affect their credit cards if they close some of their useless cards. Yes. It will initially affect your credit rating, but you can repair this by having good transactions on your existing cards. What happened is that it is better to have two or three quality cards with high credit limits than to have six to seven cards with low credit limits or same total credit amount. Your credit bureau will show your credit accumulation to prospective creditors and this is why you cannot negotiate for credit limit review with your existing card issuers.
Managing your card
Credit revolvers, that is, card holders who only pay minimum repayment on their cards, will want to say that they are servicing their debt and running their credit system in order. It is better to pay more than the minimum repayment required by your credit card issuer. Revolving round debt does not give you a good credit rating. Your ability to show that you can pay more than required is a strength that will add to your credit rating. It is good to be using your card for quality shopping regularly than to be servicing only the interest payment. The balance of your current account should be high enough to reflect you are liquid.
Credit card repayment policy
If you are sure you can pay your minimum payment every month without default, it is better for you as it keep your loan repayment low and your credit rating high. If you are not sure of getting repayment every month, it will be better you enter into insurance called Credit Card Repayment Protection (CCRP). Credit card repayment protection is provided by insurance companies (third party) with you paying regular payment as premium and with the offer of paying your monthly repayment on purchases in case of unemployment, sickness etc so that you will not default. You may set up a direct debit of your current account so that you will not default in repayment.
The best credit card
The best credit card is not the one that is offering you the lowest rate of interest on your purchases or zero percent transfer or APR. You need to check what you are being offered apart from the interest and the APR. You also have to state what you want from your card. For example, some card issuers will not let you know that you pay heavy penalty if you use your card abroad. If you are a regular traveler and will be using your card abroad it will be better you avoid this card. Some will charge you zero percent introduction purchase for limited period of time. This starts from one month to twelve months. Varying credit card offers you instant discounts all over the shops, discounts on your holidays, wine, music, DVD’S, insurance etc if you pay by your card. Adding up all these benefits of a card that has high rate of APR but more benefits may negate the benefits of issuers with lower rates of APR.
In this age of globalization and advance information technology, credit card is one of the conveniences of doing shopping both locally and abroad. Services can be paid for internationally through the use of credit card. The cards are compatible for use in more countries now than before and that is what makes it worthwhile. With the economic crunch in UK, and most creditors tightening their credit policies, existing credit card holders have told of their benefits over their cardless counterparts.