Credit Card Tips from Insiders

Credit Card Tips from Insiders

Credit cards are rarely good news. The only intelligent way to use a credit card is to pay off all your balance each month, if you don't think you will be able to do that it is probably better to avoid them altogether and to save up before buying whatever it is you want to buy. However, if you feel you need to use credit cards here are some tips from insiders who have worked in the credit card industry.

1. Avoid credit cards. They will undoubtedly cost you money.
2. If you cannot heed tip no 1. then try to get a credit card with a zero per cent interest rate.
3. Check which bank the card is being issued by. Banks have dozens of different credit card brands but they will not allow you to transfer a balance from one of their credit cards to another one. So make sure before you apply that you do not already have a credit card with that bank, as you are wasting your time, you may be refused, and a refusal which have a negative effect on your credit score.

Check the Fees

4. Check what the fees are. Balance transfers will have a fee attached, generally from 2.95% to 4%.

5. Ensure you undertand the concept of "negative payment hierarchy". This system for allocating payments means that any payments you make are used to reduce the the cheapest loan first. For example, if you transfer $4000 onto a credit card with a 0% balance transfer, then spend $400 on the card, then send in a payment of $400, your $400 payment will be deducted from the $4000 not the $400. The $400 you spent will continue to incur interest until the whole of $4000 is paid off in full.

Conclusion : NEVER use a 0% balance transfer credit card to buy anything, once you have transferred your balance, stick it in a adrawer and never use it again.

6. Certain credit cards have promotional periods that have differing lengths of time, e.g. 0% for 12 months for balance transfers, but 0% on purchases for only 3 months. This is designed to confuse you and make money for the credit card issuer, so only use credit cards for one purpose, either purchases or balance transfers - not both.

7. Make sure that you never miss a payment. Any missed payments will negatively affect your credit score. Even just one missed payment will cost you money in fees and increased interest rates, as any zero rate will be stopped. If for some reason you miss a payment, then phone your credit card issuer, strangely enough they are human and may pay back any fees they have charged youm particularly if it is the first time you have missed a payment and they may give you your zero interest rate back. It is a good idea to pay the minimum monthly payment by direct debit.

8. PPI is designed to bring in money for the credit card issuer - don't sign up for it !

9. Make sure you watch the payment dates. Banks will often change dates to catch you out and get you to make your payment too late. Each time you receive your credit card statement, check the due date. Don't assume you have plenty of time, you may not have.

10. If you signed up on a promotional interest rate, then phone the issuer one month before the promotiona rate ends to find out the exact date it expires. Then if you can make sure you transfer the balance somewhere else.

11. If you can then avoid takng out another loan to pay off a credit card. Credit card issuers carry out regular checks and this may affect your credit rating.

12. Don't forget rule 1 - try to avoid credit cards at all costs. Mortgage interest rates may have fallen but interest rates on credit cards and personal loans have gone up !