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Author Topic: Credit Cards- Which is right for me?  (Read 4332 times)

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Credit Cards- Which is right for me?
« on: May 10, 2005, 06:58 »
Credit Cards, A Full Monty Guide.

When I?m at parties and people discover I?m a ?money saving expert?, the ones who don?t yawn and walk away almost invariably ask me, "whats the best credit card?"  This always stumps me, as there?s no right answer.

Picking your plastic

Lenders utilise the fact that people use one card for many purchases to manipulate us. For example, use a balance transfer special card rate for spending and they deliberately allocate repayments in such a way that you?ll pay a fortune. To properly play your plastic you need to use a range of cards as bespoke precision tools. Using the right tool for the right job will decimate your credit card costs and if you?re worried your wallet?ll be stuffed with more cards than Paul Daniel?s sleeves, there are options for those who don?t want to go the whole hog.

How this Guide works

Below I?ve briefly detailed the major types of card and when they should be used. Then I?ve linked through to a specific article just on that type of card.  Scroll down the article and make sure you pick all the types of card that apply to you, then read the article, which will include current best buys.  See each card as being for a distinct purpose.

Do you have existing debts on credit or store cards?

If you already have hefty bills then transferring the balance will usually substantially cut your interest costs. In practise this means your new provider pays off the debts on your current credit or store cards for you.
You then owe it the money at a hopefully lower interest rate. There is a choice between short term and long term deals.

Do you spend on a card, but not clear the debt in full each month?

If you regularly dip for your plastic without clearing the debt in full each month then the prime concern is minimising the interest cost.

Do you spend on a card, but always repay your balance in full?

If you pay off your balance in full each month then the interest rate is irrelevant. Instead focus on the gains available from using the card for spending. The key is the reward scheme offered, whether points schemes or cashback. There?s a huge rash of different schemes, but by picking the right one you can substantially gain.  There are two choices here.  For simplicity and transparency go for the Best cashback cards.  However, in rare circumstances you can beat this with the Best credit card reward schemes.

Are you debt free? In which case you can take REVENGE and make free cash from credit cards

It?s simple; if they lend you money at 0%, you can save it and earn interest on it. There are a range of mechanisms for getting the money into your savings account quickly and easily. Substantial cash is available from this, but it should only ever be used by those with a good credit history, no debts, who aren?t planning to borrow and prepared to make a little effort.

I?ve tried the above suggestion but I simply can?t get new cards.

Some people are turned down for all new credit cards, possibly stymieing any interest savings.  The first thing to do is check there are no errors on your credit reference files. Yet, even if there are no errors, don?t give up ? there?s still another way to cut the cost. I have a special technique called ?the Credit Card Shuffle?, which in some cases can cut the interest in half without any new cards.  

What about Store Cards?  Are they any good?

As a base answer, no - store cards are the devil?s debt.  Of the 28 major UK store cards, 22 of them charge over 25% interest, and even the best of them are not better than average high street credit cards.

Never ever ever use these cards for borrowing on.  However, there are a couple of reasons to have a storecard, again providing you never, ever, ever use them for borrowing on (I don?t know if I?d mentioned before that you should NEVER, EVER, EVER use them for borrowing on, so thought I?d repeat it just to make sure).

Membership benefits, like free Harrods' toilet use or special store cardholder evenings.

Initial discount offers. Most store cards offer a bribe for signing up ? such as 10% off the first time you spend on it. Hold off joining until you?re ready to buy something RRR-EALLY expensive.

Or to be even more cunning, ask friends & family if they want anything too (make them give you the cash), then get the discount but pay off the balance in full so there?s no interest charge. And if you bought your friends stuff, they can always sign up, get a discount, and return the favour. Yet do remember never, ever, ever borrow on a store card.  Either use the best cards for spending or if you already have debts on them balance transfer them.

What card should I use when on holiday?

Trip abroad and it is exchange rates that count. Using the right card is the cheapest way to spend, as the rates are based on the Visa and MasterCard wholesale rates which unleash bulk buy foreign currency at hugely beneficial terms. Yet most card providers snaffle the benefits by ?loading? exchange rates and adding up to 3%. Plus take cash from an overseas hole in the wall and there are withdrawal fees e.g. Barclaycard charges 1.5% or ?1.50 whichever is higher. Yet the right cards don?t do this.  Picking them can cut your holiday costs by up to 6%.

Are there any other different types of cards to be aware of?

For buying valuable goods use one of the approximately 30% of cards with purchase protection.  This reimburses you if the goods are lost, stolen or accidentally damaged. Nationwide?s Visa provides the largest cover, ?50 to ?15,000 worth for the first 100 days, but other cards aren?t far from it.  Some also give an extra year?s extended warranty cover for electrical goods purchased on them.

Many cards also have free travel accident insurance with ?50,000 to ?250,000 worth of cover for accidents on planes and hire cars booked with them. Some platinum and gold cards include full travel insurance, but ensure you pay for the entire holiday including the deposit with the card to qualify.

Original Article

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