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finance: Credit Cards

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Credit Cards

Credit cards are a cost-effective method of offsetting bills compared to overdrafts and loans, which can incur higher charges. Loans often incur a fee for early repayment, so credit cards can be a key part of good financial planning.

0% Balance Transfer Cards

These cards are an excellent tool for reducing the interest on borrowing. The more interest that is charged on a balance the longer it will take to pay off, so transferring a 'toxic' balance to a zero per cent card can help borrowers to get on top of debts. These cards have a period where no interest will be charged on the balance, after which a normal rate will be applied.Transferring a balance usually invokes a one-off fee, after which no further fees will be charged until the end of the zero per cent period.

Cards for Bad Credit

In the case of borrowers with a bad credit history, it is often necessary to improve credit score before more cost-effective methods of borrowing become available. County court judgements and defaults can seriously affect credit rating, and whilst these cards do not give the most beneficial rate of interest, they are easy to obtain.Paying off the balance on a monthly basis can improve creditworthiness and open the door to cheaper borrowing.

Provider Card Type 0% Transfer Period Transfer Fee 0% Purchase Period Representative APR
HALIFAX Balance Transfer Card (36 months) 36 months 2.49% 6 Months 18.9%
HALIFAX All in One Card 19 months 1% 19 Months 18.9%
ms Bank Credit Card 15 months 2.9% 19 Months 18.9%
Natwest Logo Cashback Plus None No Fee None 12.9%
natiowide Balance Transfer Card 26 months 2.4% 3 Months 17.9%
natiowide Purchases Card None 2.4% 15 Months 17.9%
Santander Logo 123 Credit Card 23 months None 23 Months 16.5%
Sainsburys logo Purchase Card 19 months 3% 9 Months 18.9%
Sainsburys logo Balance Transfer Card 34 months 2.89% 6 Months 18.9%
tsb logo Platinum Balance Transfer Card (2 months) 28 months 3% 3 Months 18.9%

0% Purchase Cards

These cards operate in a similar manner to zero per cent balance transfer cards, with no interest being paid on purchases for a set period. After the interest-free period the standard rate of interest will be applied, so it is essential that the balance is cleared before this happens.

Rewards Credit Cards

These cards will pay a percentage of the total purchases to the borrower, provided the balance is cleared every month. These cards often have a fixed rate of interest and an annual fee, so failing to pay off the balance every month can incur charges that outweigh the benefits.

Points to Note:

  • Late payment can lead to the withdrawal of the zero per cent rate and can damage credit rating.
  • Some rewards cards levy an annual fee, so purchases have to be sufficient to offset the cost of the card.
  • All borrowers have access to their credit score, and applying to Experia for a statement of creditworthiness can help to effectively manage borrowing.
  • Paying off the cards with the highest interest first or transferring these amounts to a zero per cent card is the most effective way of borrowing.
  • Credit cards are not a substitute for effective budgeting.

Cards to Consider:

Santander

Santander offer a 3-2-1 card which pays up to a 3 per cent award on purchases of fuel and shopping in major stores. A £24 annual fee is charged and there is a 15 month zero per cent period on transfers and 18 months on purchases. There is no balance transfer fee.

Capital

OneCapital One offer the best card for rebuilding a credit score, and low-income borrowers or those with a poor credit history are likely to be accepted. The APR is 34.9 per cent.

Barclays

Barclays offer a starter range of cards for building credit score. Good management can reduce the interest, and a three month interest-free period is available.

American Express

American Express offer a starter card with a zero per cent fee and 5 per cent on purchases up to £2000. Other cards levy a £140 fee and attract rewards points. A good credit rating is essential for this card.

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