There are a lot of great credit card deals out there, but which to choose and how to choose are questions that have complicated answers. We’ll get to all of that detail further into this exhaustive guide.
In the meantime remember this: Credit card issuers are not charities, and card credit is not, and should not be considered, free money. Getting a great credit card deal is a two-part process. Half of it is making the right choice, certainly, but the true test begins when the card arrives in your wallet. We can tell you everything you need to know about credit cards, their strengths weaknesses, their rewards and their contractual catches, but ultimately it’ll be down to you to use it responsibly…
Whenever you apply for a credit card – or any other form of credit for that matter: Loans, in-store and so on – a credit search is conducted. There are currently three primary organisations that lenders use to access your credit score: Equifax, Experian and CallCredit.
The last thing you want to do to assess your credit-worthiness by serially applying until someone says yes. That’s because each time a card issuer runs a credit check, it has a negative impact on your score.
That may seem counterintuitive, but reference agencies do this because, statistically, those who make multiple credit applications are demonstrating that they are in some type of financial strife, and therefore not a good bet for lenders.
All three of these credit reference agencies will supply you with a credit report either for a small, one-off fee or by signing you to a monthly subscription that allows you to measure how your financial decisions affect your credit score over time. This latter course is pretty expensive for what it is, but we’ve found that by signing up for their free 30-day trial, then cancelling before the trial is up, you’ll essentially get to see your credit score for free.
It’s worth noting that these agencies will not allow you simply to log in and cancel online, however. You’ll have to call them and therefore have to suffer a person called ‘Adam’ (okay, this one’s a bit anecdotal) whose job it is to convince you you shouldn’t. Be firm with Adam, be insistent.
Tip: Although they say you can’t cancel by email, we managed it through the simple use of threatening language.
What an odd tip. Yes, it is. Not the sort of thing you usually hear from advice sites like Bilgo at all. It’s a psychological tip, this one. Wait! Don’t go! Look…
It may take quite a while to ultimately find the card that’s right for your needs. During your journey there will be many distractions. Going in with the best of intentions can quickly turn from ‘I just need to pay off my existing card debts’ to ‘If I get this one, I also get fuel points, and the card fee is only a bit more, and the percentage balance fee only a little bit more, and the 0% balance transfer period only seven months less, the APR is insane, but I’ll always pay it off in time’… and so on.
Before you know it, you’re applying for a card that’s barely fit for the purpose you originally intended. So, write down your mission on a piece of paper and refer back to that mission when you finally choose a card. Does it fit, or have you ‘satisficed’ for a whole bunch of ultimately costly benefits you don’t need? In China, calligraphy is a form of mental discipline because writing down your intention means you’re more likely to follow through.
There can be absolutely no doubt that credit cards are, as a whole, pretty confusing. There are literally hundreds of dimensions credit cards can be measured by, from big, obvious stuff like APR to how many Clubcard points you get per £1 spent and what that equates to in real money versus the flat cost of a yearly card fee.
Credit cards, as a rule, in all but the most draconian, extortionate APR credit repair deals, are built to be attractive. But did you know, for example, that ‘representative’ APR means the issuer only has to offer the stated deal to 51% of those who apply in order for them to legally advertise it?
Read the small print, cost it all up, and factor in every dimension of the card that you are offered – because it may be the same card you applied for in name only. Complicated, isn’t it?
APR stands for ‘Annual Percentage Rate’, and the fact that it is displayed prominently on all financial products that lend money is a legal requirement. There are two types of APR (just to make things nice and easy). They are:
- Personal APR
- Representative APR
It’s important you know the difference. An APR – that’s your personal APR – is a percentage that represents the cost of borrowing. It is the APR you will get. Right, so what’s representative APR then?
Representative APR is an APR you might not get – the one card issuers puts on its advertising, but will usually only offer to those with a credit history cleaner than a satellite factory. Personal APR can be substantially different to representative APR, so make sure you know what you’ll actually be getting – and that you’re happy with it – before signing up.
Introductory offers are what you came for. No, really, they are. The 0% on balance transfers, on purchases, those 3,000 extra air travel points you get if you spend X amount within the first three months. When you’ve whittled it down to a shortlist, it should be these that drive your final decision.
If you want to learn the entire step-by-step process of applying for a card, you can find a more in-depth guide at the bottom of this page.
There are a whole host of reasons you might be thinking of getting a credit card. Perhaps you want to consolidate your debt or get that big thing, or maybe you simply want to be rewarded for something you already do.
Whatever the reason, the fact that you’re here means you’re serious about it. But where to start? If you’ve never had a credit card before, that can be a tricky question to answer all by itself.
Lenders are going to want to know a lot about you. Who you are, where you’ve lived for the last three years, about your partner, your kids, your income. Save yourself some time and make sure you have all these details to hand before you go looking for a deal.
Credit card providers like to see a decently sized history of you borrowing money and paying it back. If this is your first credit card, there’s a good chance that such a history doesn’t exist. That means that even though your credit history is essentially spotless by proxy of its non-existence, lenders will not see this as a plus. Fickle, aren’t they?
A proven history is far superior to no history at all, so as a first-time buyer, you’re going to need to manage your expectations. Good advice for first-timers is to apply to your own bank for a card. If you’ve kept your account in good order, you have a better chance of being accepted on a lower APR here than you have anywhere else because, well, they know you.
Further up the page you’ll find advice on making yourself aware of your credit rating. Remember, as counterintuitive as it seems, no credit history is nearly as bad as poor credit history. With no credit history it is unwise to aim for the top because multiple refusals will lower your credit score.
So, following step 2, above, aim relatively low, manage your expectations and be prepared to be offered only cards with high APRs and low limits. These cards, if used properly, provide a stepping stone toward the card or cards you’re really after.
Be patient if you can, be prepared to build a reliable credit history because, sadly, if you don’t have one, it’s likely you won’t have a choice.
The short answer is: It depends on what you want to do with it. To simplify our answer to this question, we’re going to break down each ‘type’ of credit card and what it does. Having said that, do bear in mind that there are many credit cards out there that like to mix things up a bit.
‘Air miles’ cards that offer 0% on purchases or balance transfers, 0% balance transfer cards that offer Nectar points or money transfers. It get terrifically complicated. So, for the benefit of offering you an understanding of the features available on cards across the whole UK market, we’ll pretend that each card only does one thing.
Without further ado…
In this section, we’re going to look at the two most popular types of credit card – 0% balance transfer cards and 0% purchase cards – in a great deal of detail and, following that, we’ll touch on each of the more minor, slightly more unusual or purpose-specific types of card.
Balance transfer cards allow you to transfer debt from existing cards into one place – the new card – and pay off the debt within a stated period at 0% interest. Brilliant, huh? Yes, provided you can stick to your repayments.
Balance transfer cards are designed to help those in debt stem the interest bleeding from their existing card debt and address their overall deficits across a manageable period of time. They are ideal for the focused debt-clearer.
However, 0% balance transfer credit cards are often taken out because they are also a way of sweeping nagging debt under the carpet and practically forgetting about it for a while. Needless to say, those who treat their new card this way will often find themselves far worse off when they reach the end of the 0% period and start paying the comparatively exorbitant APR.
It is also worth noting that failure to pay off the monthly minimum on the vast majority of balance transfer cards can and does result in full retraction of card benefits. That includes the 0% period in most cases.
The longest 0% balance transfer cards also require the best credit rating
Since 0% accumulates nothing over time, the longer the interest-free period the more manageable payments become. That means that in the complicated mathematics of risk assessment, especially lengthy periods – 40 months, say – will only be offered to those with a cast-iron credit history.
Cards offering the longest 0% interest periods also in many cases come with the strictest rules, the harshest penalties and the highest flat fees, so it pays to work out the pros and cons of each card carefully.
Pros and cons of a 0% balance transfer credit card
Every credit card, no matter what it offers, comes with a sting that will either equal or outweigh the benefits. Credit card providers are not charities – they rely on a large proportion of their customers using the card beyond their initial intent.
0% balance transfer credit cards are no different. You just need to play within the rules.
0% balance transfer cards – how to avoid the pitfalls and win the game
As with most types of credit card, fundamentally, the provider relies on a combination of you not sticking to the rules and/or giving in to temptation and spending on the card instead of paying off the balance. Here’s how to stay ahead of the game…
Be aware that all 0% balance transfer credit cards charge a flat percentage fee
This usually ranges between one and three per cent. A typical 3% balance transfer fee, then, will cost you £30 for every £1000 of debt transferred to the card. This fee constitutes the provider’s way of offsetting the cost to them if you do manage to pay off the balance by the end of the 0% period, then subsequently cancel the card.
Don’t spend or withdraw on it… ever
Again, the credit card provider wants you to do this. It wants you to increase your debt, exceed the 0% period and put yourself in a position where you’re only paying off interest. Cards that also offer 0% on purchases are deliberately throwing temptation your way, knowing that many people will rationalise the additional spend to themselves and later come unstuck.
Best course, if your intention is purely to pay off the balance transfer and be done with it, is to either destroy the card or give it to a friend or relative for safekeeping, but whatever you do, never put it in your purse or wallet.
Beware the words ‘up to’
If you see these words prefixing the number of months the interest-free period lasts on a 0% balance transfer credit card, beware. If your application for this card is successful, the provider may not in fact offer you the headline interest-free period.
This ‘up to’ modifier means providers may offer you a card with a far shorter period instead. A person applying for a card with a 40-month interest-free period may find themself being offered the same card, albeit with a 12-month period in which to pay back the balance instead. This is usually the case if the person applying has a good, but less-than-stellar credit rating (those with a ‘bad’ credit rating tend to be flat-out refused).
If this happens to you, break out the calculator and work out how much the balance you wish to transfer will cost you each month across the new, shorter period. If you can’t afford it, you’re usually going to be better off not signing up.
Always pay your agreed monthly balance on time or you may lose your account benefits
Many 0% balance transfer credit cards will reserve the right to revert to the card’s standard APR – usually excruciatingly high – should you fail to make a monthly payment. Again, these cards rely on a proportion of their users doing exactly this in order to turn a profit.
A few cards that won’t penalise you this way – in an effort to reach the top of the best buy tables on many comparison sites – have recently reached the market, but these are still the exceptions rather than the rule. As always, read the small print and make sure you understand under what circumstances and to what extent you will be penalised should things not go the way you planned.
Pay off your total transferred balance in full, in the allotted time
No doubt this is what you intend to do. It is, after all, the entire purpose of a 0% balance transfer credit card. It can be easier said than done, however.
It would be tempting to choose a card that demands you pay off your debt across the shortest period you can afford – tighten the belt, get it done quickly. However, it’s far wiser to leave yourself as much breathing space as possible. With 0% balance transfer cards more than any other type of debt, the longer the period, the better. The more breathing space you give yourself, the more likely it is you’ll be able to cope with unforeseen financial hardships.
Who's it for?
People who have a lot of existing card debt and for whom interest repayments are slowing – or stopping completely – their repayment efforts.
How 0% purchase credit cards work
These cards are designed to help you buy ‘big stuff’ – an epic holiday, that 105” TV.
But holidays are typically quite difficult to pay for on interest-free credit, and vast televisions and other high-end consumer electronics tend to offer short interest-free periods likely to tighten the screws beyond the tolerance of your monthly finances.
0% purchase credit cards, then, fill a useful gap in the market, and are a good choice for that big buy, provided you pay it all back within the stated period – usually between six and 27 months.
Pros and cons of a 0% purchase credit card
As with all credit cards, 0% purchase cards give to those who stick to the rules a host of benefits while at the same time relying on those who don’t in order to turn a profit for the provider. Like all cards, 0% purchase credit cards come with their own specific set of benefits and drawbacks.
0% purchase credit cards – how to avoid the pitfalls
As with other types of card, card providers win when you fail to stick to the rules the card sets out for you. If the first thing you do with the card is buy a giant 4K TV and you fail to pay back the balance by the end of the 0% purchase period, the card issuer wins.
Providers of 0% purchase cards put temptation in your wallet – don’t give in to it
If you’re honest with yourself, you’ll almost certainly conclude that the ‘something’ you want to buy could be saved for instead. Often, the difference a 0% purchase credit card makes is having that something now rather than later.
After the purchase you originally take out the card for, having the option of buying something now and paying later sat right there in your wallet or purse is more temptation than many can bear. Card issuers are counting on it, in fact.
Some 0% purchase cards charge a fee on purchases between one and four per cent
Similarly to most 0% balance transfer cards, some 0% purchase cards will charge you a flat fee equivalent to a small percentage of the balance. This usually ranges between one and four per cent.
When choosing a card, you should consider whether these fees (if levied on your card of choice) actually offset the benefits of the card altogether. For example, a 4% balance fee on a £2000 purchase equates to £80, which may not be a whole lot better than getting the item on regular store credit, depending on the repayment period you have in mind.
Card providers hope you won’t be willing or able to pay back the full debt within the 0% window – prove them wrong
There’s an easy way to beat them at their own game, of course: pay it all back on time. Arguably, if you’re not 100% certain doing so won’t be a problem, you shouldn’t apply for the card in the first place. Nevertheless, people do, and they fail. Don’t let that be you.
Who's it for?
People who want to make that big purchase, but would like to do so on an interest-free credit plan that extends beyond the typical six or 12 months offered in-store, or are making the type of purchase that offers no such plan – holidays with intricate combinations of transport and board are a good example.
Who's it for?
People who don’t need 0% periods either for purchases or for balance transfers and merely want the flexibility of being able to make purchases when funds are otherwise low. This is your Swiss Army Knife credit card, it does most things you’ll ever need it to, but none of them as well as a precise, dedicated instrument.
Who's it for?
The frugal. 0% balance transfer cards typically charge a smaller percentage fee than is usual on all balance transfers. This usually ranges between around 1.5% and 3%.
Low fee balance transfer credit cards tend to focus their benefits on keeping this fee as low as possible – usually at the expense of some other factor, such as length of interest-free period.
Who's it for?
Folks with a bad/poor credit rating. Not an especially difficult situation to find yourself in these days. Still there are a number of ways to improve your situation, and cards that advertise ‘poor credit’ or ‘credit repair’ are one.
These cards offer low limits and high interest rates, but tend to be granted even to those with poor credit. Using one of these cards wisely – small spends, on-time repayments – can help improve your credit score, which is why they’re often referred to as ‘credit builder’ cards.
Who's it for?
The indecisive? In all seriousness, though, many 0% balance transfer cards also offer 0% purchases and vice-versa. It can be hard, in actual fact, to find a card that offers one without the other. That’s because it’s ultimately the same thing wearing different clothes. You’re still just putting debt onto the card no matter the debt’s origin.
As with each of these type of card when considered separately, the issuer makes its money through a combination of small percentage fees, annual fees and the statistically proven hope that around half of you will fail to pay off the full debt within the interest-free period.
Who's it for?
People for whom credit cards are their preferred method of spending. Note, we don’t say ‘people who like free things’ because, well, because that’s not really the way credit cards of any kind should be perceived.
Anything garnered through ownership and use of a ‘reward’ credit card – be that Nectar points, air miles, fuel vouchers and so on – should be considered a bonus and not a reason to choose a card in and of itself. The reason for this is simple: Rewards rarely amount to much, while these cards almost always levy an annual fee.
Getting the reward to outweigh the annual fee will take some doing in and of itself. Factor in other costs and, well, you get the picture…
Who's it for?
People who travel a lot, natch, but let’s make one thing clear: You’ll need to be abroad one hell of a lot to make good use of this quite specialist credit card.
If you do travel a fair bit, fees for use of most credit cards overseas are well worth delving into the small print for – most have transaction fees of around 3%.
Cards categorising themselves as ‘overseas spending cards’, however, tend to waive these fees when used abroad. As ever, it’s a case of ensuring you read the small print. In most cases, a specialist overseas spending card will provide a cheaper solution than changing money at the airport, using foreign cash machines, changing money at the Post Office or using a regular, non-specialist credit card, if only by a piffling amount of money.
Who's it for?
People who want to pay off a non-credit-card debt. Money transfer credit cards, sometimes known as cash advance cards, help you pay off many kinds of debt, essentially doing the same job as a balance transfer credit card. If you have an overdraft you want rid of, say, a successful application for a card with this feature (bearing in mind many other types of card offer this as ‘a’ feature rather than ‘the’ feature) will allow you to pay into your bank account with the card.
It’s a powerful thing, alright, but like 0% balance transfer and 0% purchase cards (many of which offer this as a ‘feature), you’ve got to be sure you’re in a position to pay it off before the – often hefty – interest rate kicks in.
Who's it for?
People who fly a lot – that’s what the issuer will tell you. Ask us? They’re not really for anybody.
These cards primarily tend to offer air miles – now called Avios – in addition to those you earn flying. They are designed to compliment existing amounts rather than provide enough air miles in and of themselves to facilitate anything meaningful. It’s rarely worthwhile getting one if you intend to acquire enough miles for free travel through spending alone.
For example, one card that’s been around for a while now would have you spend £6,000 on it to earn one economy return to Paris. And if that weren’t bad enough, you’ll also be paying both the taxes and any other additional charges. That’s… well… crap, really. You’re absolutely going to be safer buying the Paris trip with cash than potentially racking up £6,000 of credit card debt, even if you do possess both the intention and the means to pay it off.
Who's it for?
People who wish to eek additional value out of their regular spends. Cashback credit cards essentially offer you a small percentage money back on anything you spend on the card. Although this typically amounts to around 1%, many have introductory periods during which the top cashback cards offer as much as 5% cashback. You’ll need a damn good credit rating to get one of those, however.
Cashback credit cards take a few different forms and so can also be useful to those for whom a specific cash alternative such as fuel or supermarket discount points will suffice.
Who's it for?
Companies. A business credit card is one issued to a limited company and can be useful as a way to facilitate employee spending, or even, in the case of very small businesses and sole traders, to temporarily bankroll operations.
Other than higher limits, greater flexibility in the number of potential cardholders, and a tendency towards a better APR, business credit cards aren’t all that different to regular credit cards. They too come in the same myriad flavours: Rewards cards, cashback cards, interest-free periods and so on.
Who's it for?
Students, of course. Special credit cards exist that are designed to appeal to the needs and lifestyles of our precious, precocious, academic young-folk. Because, obviously, what they need, in the face of rising rents, spiralling tuition costs and increasingly egregious student loan terms, is more debt!
Actually, like all credit cards, they’re great when used properly, but can easily spiral beyond your control if not kept on a tight leash. One particular plus point for student credit cards is their low limits. Most won’t exceed £500, meaning students will tend to be more inclined to turn to them when they have an empty fridge than when they want the latest MacBook Pro.
Who's it for?
The wise? When it comes to credit cards there are some belters out there in the UK marketplace, but with notions like ‘representative APR’ and other factors dependent on your credit rating, it would also be true to say that the only people likely to qualify for those headline rates are the people who need them the least.
And that’s where your own bank might be able to step in and help. You see, your banks knows you, it knows your history and your spending patterns better than anyone. For that reason, a card refused elsewhere may well be offered on similar terms by your bank. Your bank doesn’t rate your credit standing solely based on your credit score.
Some banks even reserve specific cards only for their customers. That means it may even be the case that your bank will offer you rates, rewards and features, you simply cannot get elsewhere.
Who's it for?
A whole bunch of folks. Perhaps you’ve just arrived in the country and are struggling through the process of opening a bank account. Maybe you’re going abroad and would like the security a card offers without stumping up for the spending fees regular credit cards insist upon when used overseas.
Maybe you’re a parent who wants to provide a limited spending facility to your beloved offspring. Maybe your credit rating is as bad as it gets and you need some means to begin scraping yourself from the bottom of the credit barrel.
There are literally dozens of situations a prepaid debit card might be useful. These cards allow you to preload cash, then do what you like with it. They generally make their money through a one-off fee (usually £10-£15), combined with a percentage fee (usually 2–3%) applied when loading the card and sometimes a monthly fee (anywhere between £1 and £12.50).
While this can, and does, sound a little expensive, depending on how you use it, these costs can be partially or completely offset by the benefits they provide.
For example, some of these cards also offer a credit-builder facility, making the cost worth your while. There are no credit checks, so no one is ever refused. Or, if you’re spending abroad, the 2–3% for loading the card is no different to the 3% (ish) most issuers will charge you on foreign purchases.
Who's it for?
Wealthy people. These cards are sort of self-defeating in that respect. To get one you’ll need to be wealthy. You’ll need to not actually need credit. You’ll also have to possess the kind of credit score mere mortals are in very little danger of ever reaching.
So what are they for? Well, if we’re honest, it’s mostly status. A piece of plastic machismo high-flyers can slap down at the end of a three-Michelin-star banquet.
They come with other benefits, of course. Since many of these cards have no limit – yes, you read that correctly: No limit – the expected spend tends to mean the rewards are rather generous. If they weren’t there would be little reason for anyone to have one at all.
Rewards include things like air miles, companion air tickets (a sort of buy one get one free deal arranged with airlines), access to first class lounges, breakdown cover, travel insurance and so on. If you’re looking at that list thinking ’So it’s for people who fly a lot then?’ you’re bang on.
High limit (or no limit) cards also tend to come with hefty fees. But what the hell… if you want (and can get) one of these cards, you can afford it, right? Taken to their extremes, it was an American Express Centurion card that was used to purchase Amadeo Modigliani’s ‘Reclining Nude’ for a mere $170 million at Christies.
We told you right way up at the top of this page we’d take the timid among you through the whole process step by step. Well, we like to make good on our promises, so here goes…
Now we’ve been through detailed descriptions of every type of card commonly (and uncommonly) available in the UK, you will no doubt have noticed that each occupies its own gap in the market, setting itself apart from all others by serving a specific need.
That means all you need to know is what that need is. So before reading on, pop back up to the section called ‘Types of credit card, what they do and who they’re for’ and take a little time to match your needs with the type of credit card that serves them. It’ll be time well spent.
Hold on tight, there’s a lot to take in here. Credit cards can feature as many as a couple of hundred differentiators – that is, factors that allow them to be different to their competitors. Before you’re completely overwhelmed by that information, however, know that there are very few of them you should primarily worry about when initially choosing.
- Annual Percentage Rate (APR): Important because the advertised rate is not necessarily the one you’re going to get. Nothing to worry about if you intend to pay off in full each month (how you should use a credit card), but you should absolutely consider it a vital factor if you’re planning on making a purchase, say, and only paying off the interest for while (how many people actually use credit cards)
- Annual Fee: Not all credit cards have one, but many do, and if they’re high you won’t find card issuers spilling over one another to tell you about them. This is a flat fee, usually paid once per year
- Grace period: How much time is allowed to elapse between the time you’re billed for your monthly card usage and you actually paying the bill. You can’t stay within it without first knowing what it is
- Transfer fees: Depending on the type of card it may charge you for transferring balance or purchasing at 0% credit. Find out what that percentage is and what it means to you in real terms by whipping out your calculator and trying some real-world examples
If you have these four sets of charges firmly figured out, choosing the right credit card suddenly becomes a lot easier.
Let’s be honest – most of us have some kind of idea whether we’ve looked it up at one of the official sources – Equifax, Experian and CallCredit – as to what sort of health our credit rating is in.
If you really don’t, it’s probably time to find out. All three of the aforementioned credit reference agencies offer free trials during which you can take a gander at your current rating. The only downside, perhaps, is that the numbers they provide can be quite cryptic. Experian, for example, rates customers’ credit out of 1,000, while Equifax out of 500, and even relatively the thresholds for what they label excellent, good, fair, poor and very poor differ.
You also need to take into account that it’s in the interest of these agencies to tell you your credit is ‘Good’ even if it’s on the border of ‘Good and ‘Fair’ because they also refer customers for loans, cards and other financial products.
Anyhow, they’re good enough to give you a rough idea if you really have no clue where you stand with your credit score. Just be sure and remember to cancel once your free trial period is up of they will start charging you a monthly fee.
A bit metaphysical, sure, but what we mean is:
- Credit card companies are not charities, they are publicly owned companies with shareholders and profit targets
- Credit card spends do not constitute ‘free money’
These may seem like obvious things to say, but think about it this way: If everyone fully realised this, credit cards wouldn’t exist. Credit cards rely on people spending money they don’t have so they can charge them interest, keeping a large proportion of cardholders on the ’never-never’, forever paying off interest each month without tackling the capital debt.
Remember, typical credit card APRs are excessive. So much so that paying only the interest for long enough frequently sees people paying more than the outstanding amount without yet having tackled a penny of it.
You can beat the system, but to do so you’ll need to pay back the full amount (or agreed monthly payment so it’s paid off to coincide with the end of a 0% balance transfer or purchase period) each month without fail. Anyone considering getting a credit card should take this fully onboard.
Not much point in getting a card with fuel points and free breakdown cover if you don’t drive a car. Nor is there much point in accumulating air miles (Avios) if you don’t plan to go anywhere. And who would get a supermarket card with supermarket reward points if they don’t do their shopping at that particular supermarket?
Just as the punishment should fit the crime, the reward should fit the need. Rewards may not be the be all and end all, but if you’re getting something for nothing, it’s worth considering whether that something is something you need, otherwise that something is as good as nothing. And yes that sentence does make sense, we checked.
But beware. You may think rewards are designed to make you feel happy and warm and lovely inside, and perhaps sometimes they do, but that is not why they exist. They exist to tempt you to spend more money on the card. So, if the pull of rewards is strongly felt, perhaps consider a card with little or no rewards just to keep yourself on the straight and narrow.
Okay, so by this point you have a good idea what you want and who you’re likely to get it from. Congratulations. However, there are still more details you need to be sure you’re familiar with. Primary among these is payment date.
What you’re expected to pay and when you’re expected to pay it (including annual fees and other shenanigans) will differ from card to card. Look at the card you’re thinking of going for and write down what is to be paid when. There’s a chance it might be demanding payments at times outside the ideal patterns of your incomings and outgoings. And that could be problematic.
Whether online or over the phone, while the process of applying for a credit card is usually a smooth one, the most common spot at which applicants come unstuck is when they are asked for information they don’t have to hand.
Do yourself a favour and gather together your bank and employment details, details of past addresses and existing cards and loans all in one place. It could save you both time and stress.
If all goes smoothly, within a week or two you’ll be holding your new credit card in your hand. Pretty, isn’t it? But now is not the time to admire your new shiny. Now is the time to reflect on what it is for. Credit cards should be viewed as real money.
That can be an oddly difficult thing to do when what you hold in your hand neither has the familiar crisp crumple of folding cash, nor the sense that in any meaningful way you have earned what it is poised to provide. But make no mistake, it is real money.
In fact, in a very real sense, it should be considered real money-plus, the ‘plus’ part constituting not only the rewards, the payment protection and the interest-free period, but also that extra you’re going to find yourself paying if you use it unwisely.
There’s something in the field of psychology called the Ulysses Contract. It’s a reference to the famous Greek hero who had his men tie him to his ship’s mast, because he knew himself well enough to know that he would lack the willpower to resist the Sirens’ call. A Ulysses Contract of some sort can be a good way to protect ourselves from our own tendency toward overspending behaviour.
A good example of this if you are getting a 0% balance transfer card purely for reducing existing debt would be to simply leave it in a drawer. If it’s not in your wallet or purse, you’re not able to spend on it.
This is a question you’ll see asked just about everywhere – some places will even serve you up a pre-cooked answer. Hah! What most people want to know is whether credit card protection – additional protection on purchases is really worth having or whether it’s something invented purely to poke another small leak in your wallet.
First of all…
Credit card protection, or CCP, is additional protection from fraud, theft and damage on items you buy with the card. However, just to complicate matters the term can also be applied to identity fraud and protection of the card itself, as well as payment protection insurance (PPI), which protects you against failure to repay outstanding credit. Confusing, huh? Yes. It helps to think of at as three distinct things, sometimes separate but under the CCP umbrella term, and sometimes together…
Your consumer rights have you covered if you want to return something. Within a limited period if you just don’t want it anymore, you can take it back. Beyond that, retailers will usually have to take back faulty electronic goods any time within the first year.
But what if what you’ve just bought is stolen from you? Well, that’s where a retailer’s obligation ends. It was stolen on your watch, ergo your fault. Many card with CCP will refund you for what was stolen. Whether this is worth it or not can easily be worked out by counting the number of times you’ve exited a shop only to have your brand new whatever stolen immediately. Because, let’s be honest, if it’s stolen from your home, chances are you’re covered by your home contents insurance.
Is it worth having then? That’s for you to decide, but reading through those last couple of paragraphs should give you a not-particularly-subtle idea of what we think.
Additional protection, extra protection or ID protection are all referring to the same element. If your card or card details are stolen and used without your consent, you won’t have to pay a penny. With both credit card and ID theft a very common problem in this day and age, this is something you should consider a must.
Payment protection insurance (PPI)
The term ‘PPI’ has a pretty grim set of connotations in this day and age. Primarily, this is due to the large-scale mis-selling of PPI products throughout the last decade or two, and the subsequent humble pie (with a refund side-salad) served up by the UK’s banks.
So common have PPI claims become over the last five years or so that entire companies have set up shop to ‘help’ people reclaim their mis-sold PPI. These companies don’t really offer a service, since reclaiming PPI is as easy as contacting your bank and making a complaint. They do, however, stand as one of the most common sources of nuisance calls in recent times.
But PPI isn’t all bad. The trick is to know what it is you’re signing up for and how likely it is you’ll need it. PPI will mean an additional monthly payment, but if your job security is low or your health on the wain, this can be a price worth paying, as it will ultimately protect you if you find yourself unable to work.