Many
of us use credit
cards more than often, even then we are unaware
of the financial implications that are attached to it as
each time we swipe the plastic money. It’s shocking,
but true that over three-quarters of credit cardholders do
not know
what Annual Percentage Rate (APR) applies to their card,
despite being aware that this is the key piece of comparative
cost
information.
A
survey, which was carried out recently, showed that around
70 per cent of the people have at least one credit card, with
37 per cent of cardholders having two or more credit cards.
While around 60 per cent of cardholders (who thaught they
knew
more or less about cerdit cards) could not answer specific
questions or extract key information about the APR and fees
for late payment or cash withdrawal.
To put it in simple words, the higher the APR, the more you’ll
pay each month on any outstanding balance. So, at persent,
if you have higher withdrawal against your cards, here is
an golden opportunity to clean up your credit by following
these
few steps:
Switching the balance
Over a period of time if you’ve built up a hefty balance
which you cannot pay off in one go then it is time to consider
a transfer. Research shows that the average APR for credit
cards for purchases is 16.1 per cent. With a balance of £3,000
on a card offering a rate of 16.1 per cent, and paying off
the minimum balance each month, over £400 a year could
be saved by switching this balance to a different card.
Watch out for high APR
On any purchases during and after the balance transfer you
need to keep a close eye on high APR. Lots of zero per
cent balance transfer cards charge between 9.9 per cent and
13.9
per cent interest for purchases, because they have to fund
the zero per cent interest
rate on your transferred balance.
Introductory deal
Do not be too easily taken over by 'special introductory
offers' since you do not have a balance to carry over or
transfer.
Once the introductoy rate expires, you’ll then be flipped
into a rate of between 9.9 per cent and 14 per cent and it
will be time to look around again. There is absolutely no
reason to stick with a card once the introductory deal expires.
Cashback
There are over 40 cashback cards and over 70 loyalty cards
available to consumers, but it is essential to understand
how these work. Generally cashback can offer greater financial
benefits than loyalty cards, whose value can often be difficult
to calculate and can be quite restrictive. But opt for
cashback if you’re sure you’ll not carry over
a balance. The standard APRs on these cards are very high
and will outweigh
the benefits of the cashback if you slide into debt.
Prestigious cards
If carrying a gold or platinum card is not exclusive enough
for you then a whole range of alternatives are appearing
on the market, such as NatWest's Black Card or Bank of
Scotland's Carbon Card. The latter offers a comprehensive
global personal
assistance service, a £15,000 credit limit with a standard
APR of 9.2 per cent and a wide range of other benefits, including
a commission free share-dealing offer. |
