Information Guide with Top Tips on UK Credit Cards from CreditCardSorter

Easy Guide to UK Credit Cards

What is a credit card... The usual terms... How to apply for a creditcard

Interest and Credit Cards... Low interest credit cards... When does the interest charge start... How interest is calculated.. How to get interest-free credit... The APR and Credit Cards...

Introductory deals / special offers... Crad Introductory interest rates...

Card Purchase protection... Faulty goods... Anti fraud guarantees... Emergency cards / cash... CreditCard Protection... Stolen cards / Fraud... Internet crad fraud...

Reward schemes... Cashbacks... Cash withdrawals... Holidays and your card... Free Travel Insurance...

Never heard of the card issuer?...

Minimum payment amounts... Credit Card Statements... Annual Fee... Late Credit Card payments... Credit Limit...

Interest

When you borrow money the lender makes money by charging interest.

If you've borrowed £100 and the interest rate is 5% that means you would be paying £5 in interest - so you'd have to pay a total of £105 back

Interest charges in relation to Credit Cards are usually referred to as being monthly (typically 1 or 2 per cent) or annually (APR) say 10%.

When does the interest charge start

Some issuers charge you from the date you brought the item. So you're paying them interest even before you get their statement.

This might only be good for you if the interest rate is very low and you know you won't be paying off your debt each month.

How interest is calculated

In varying ways: It could be

As an Introductory rate where the issuer will, entice you in with a low rate for a particular period. See Introductory rates

Monthly; usually between 1 and 2%

As an APR. This is legally required and includes all charges as well as the interest rate. The card issuer has to state what the APR is.

When trying to compare the various deals on offer expect to be confused. It's called confusion marketing and it works because we simple souls tend to just give up and plump for the product that's closest to hand - in other words the one we've noted because of some suspiciously good offer.

If you don't check out the rest of the package you'll probably regret it. Don't wimp out. Give the b**rds a run for their money)

You can overcome this when shopping around for the best deal by getting the rival issuers to quote like against like. The best and only easy way of doing this is with the APR

It is a legal requirement for any lender to quote you the APR. So if there's any hesitation in telling you what it is, call the regulator, The Financial Services Authority. Tel 0845 606 1234

Always check the terms and conditions

How to get interest-free credit

Choose a card which only charges you interest for late payments (ie not from the time of purchase)

Pay off the balance owed within the time allowed

The longer the time allowed to repay, the longer your interest free credit lasts for. So look for cards offering this. (See latest best buys)

How to get interest-free credit

The card companies will use various offers to lure you into going with them. Typical would be:

Introductory interest rates

Purchase protection

Anti fraud guarantees

Emergency cards / cash

Reward / Points schemes

Cashbacks

Free Travel Insurance

Holiday perks

How to get interest-free credit

Low introductory interest rates are used to entice new customers.

These could apply to all transactions on the card or be limited to any outstanding balance transferred from your old card and so on.

Check what the introductory interest rate applies to.

And check what the special rate will revert to later on.

But, actually, does it matter? Maybe you're planning to stop using the card when the special introductory rate expires (if you're that organised).

Or if you just want to deal with an old card debt and intend paying off everything you owe from now on, then a very low introductory rate followed by a high interest rate would be OK. (See latest best buys - balance transfers)

Purchase protection

This is when the items bought are insured for an agreed period after being purchased with the credit card - say 90 days.

Check if this is free. If so what is the maximum and minimum claim allowed?

Faulty goods

A benefit of buying by credit card is that the issuer and the supplier are both legally liable for faulty goods.

Basically this means that the issuer should compensate you if the supplier won't.

Anti fraud guarantees

Some of these may be a bit of a con eg an offer of cover which made you pay for the first ?50 loss would only be giving you what you've already got under the Consumer Credit Act.

Emergency cards / cash

The card issuer may offer to sort you out quickly if you've lost your card - particularly while on holiday. Most card issuers do this anyway, but not all, so check.

Minimum Credit Card Payment Amounts

When you get your credit card statement it will say what the minimum amount you have to pay off is - and by when. This is usually £5 or 5% of what you owe.

This means that you could always be in debt and keep the card issuer happy just by paying off this minimum amount - provided you're happy for the interest charges to keep mounting.

See You probably won't be paying off everthing you owe for more on this.

Minimum payment amounts

Reward schemes

These are a way of attracting new business as well as ensuring that existing card holders spend as much as possible on the card.

The basic principle is that you accumulate points as you spend with the card. The points are converted into some sort of reward. These could involve anything but typically would be Air Miles and shopping vouchers etc.

You may simply get a gift type catalogue detailing the stuff your points could get you. Or the reward scheme may be fairly complex.

Don't be too excited about what you'll get. Most people don't bother redeeming their points because they're not sufficiently motivated by the offer of a free yellow smartie for every ?1000 spent - or whatever...

Ask the issuer what is on offer and how long it would take to build up the points required. Remember that rewards are probably less important than the interest rate.

Also check out introductory offers

Cashbacks

A type of reward scheme whereby you get 5p back for every ?10 spent or whatever.

Cash withdrawals

Some credit and charge cards allow this but you're likely to be pay dearly for it.

You'll probably be charged higher rates of interest than your normal bank card.

The rates between your credit card shop purchases and cash withdrawals will often vary eg you'll start being charged interest immediately on the cash and/or be charged a fee of, say, £2.

These will be charged on your next statement.

Free Travel Insurance

This is often offered as perk. Watch out though as the cover might only be for trips brought on your card.

It's often offered by card issuers who also charge an annual fee. This may make it more expensive than an insurance policy which is more relevant for your needs.

Be very careful that any free holiday insurance covers you for dangerous activities like scuba diving etc. Think twice about taking that spontaneous microlight flight on the beach unless you're sure you're fully covered.

Stolen cards / Fraud

Fraud is common. Your card could be used by someone else relatively easily.

While retailers should always check your signature, tests have shown that even bad forgeries usually get away with it.

You're normally liable for any losses up to £50 until you report your card lost or stolen.

Your card can be used fraudulently on the phone just by someone knowing your name, the number and expiry date. This could be easily obtained from a carbon copy of a transaction taken from a bin or whatever. So be careful how you dispose of these.

An unscrupulous trader who you've used the card with could do the same so bear that in mind when deciding to use it - rather than cash - in somewhere less reputable than usual.

Skimming is copying your card details for forging onto a false one ie you don't know it's been used until you get your statement. The average stolen on a card is £2000.

Skimming can be done quickly with a small gizmo - which could easily be hidden in a waiter's pocket. It's made possible by the continued use of magnetic strips rather than microchips in most credit cards.

To minimise your risk:

Fill in the card receipt fully, drawing lines through empty boxes ie so the amount can't be changed etc.

Always keep your card in sight.

Tear up the carbon copies and dispose of carefully

Internet card fraud

This is less commonplace than imagined. It's easier for fraud to happen as a result of telephone transactions.

What does seem to happen is errors on websites whereby customers credit cards and personal details are revealed to the world in all their naked glory.

This has even happened on the Consumers Association website - so who's perfect?

The APR

The APR (Annual Percentage Rate) is a way of leveling the playing field by providing a true comparison between different loans - in this case credit cards.

The APR takes all the costs into account. It was introduced by the government to prevent nasty hidden charges.

You can see how charges can be hidden: while the monthly interest rate may claim to be 1% the Annual Percentage Rate may be 15% ie more than 12 times the monthly charge.

This is because the APR has to include everything, wheras the monthly rate can be used as - how to put it politely? - more of a marketing tool. (Did anyone say "con"?)

The APR is a legal requirement. All credit card issuers must make it clear what the APR is on each of their cards.