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Choosing Your Credit Card

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.

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