Understanding Your Credit Card

Save Money By Understanding Your Credit Card
By: Peter Kenny

Around £6billion a year is lost due to credit card users not understanding how their credit card works. Too many people are dazzled by the latest deals offered by credit card companies and end up paying more than they should, simply because of a lack of any real understanding on how the introductory deal works that they took advantage of.

Millions of us have taken advantage of these offers, which include low promotional rates and the favourite one for the credit card issuers (until it came back to haunt them) the 0% deals on balance transfers or on both purchases and balance transfers, but recent research has revealed that those of us who do not understand the workings of these deals, could be costing ourselves £200 extra in interest payments.

Why am I getting charged interest?

The main reason for this is that most credit card companies always put the payments that you make towards the cheapest debt first and with many making use of the 0% balance transfer deals. When you switch your existing debt from one lender to another to save on interest repayments, the lender will pay the balance transfer deal first, as this is the debt that is carrying the lowest interest rate and any new purchases made on the card will mount up. All new purchases made are charged at the standard APR.

How does this happen?

Lets give you an example of this to make it a little clearer, for talking sake say you have a debt of £3,500 on your credit card and it consists of a balance you have transferred from another credit card company to the value of £2,000, you have made new purchases of £1,000, using the card in the standard way and withdrew cash from ATM’s to the tune of £500, with you paying back your card the money will be put towards the balance transfer first and the new purchases and cash withdrawals will be taking on the interest charges right away, which could leave you paying £200 more in interest repayments.

Earlier in the article I said that most credit card companies work this way, which means there are some that do not, most notably included in those who do not are Nationwide and the HSBC Black card, who revert to paying the most expensive debt first, leaving the lower APR debt unpaid until such a time as when the more expensive debt is cleared, which is a fairer and less sneakier way of attributing someone’s payments to their debts, where as the others are only taking away the goodness of the deal that they have offered you in the first place, by giving you in one hand and taking it away from the other.

What can I do to stop paying excess interest?

When dealing with these deals read the small print, as it always makes sense of where you stand when it comes to your finances, as knowing where you are in terms of your repayments will save you the cash that you were trying to save in the first place, though always having a clear balance at the end of each month is always the ideal scenario, but as we all know life and our finances are not always that simple.

Read Also:
Choose the Right Credit Card
Debit card versus Credit Card
Basic Information of Credit Card

Choose the Right Credit Card

Choose the Right Credit Card
By: Brian Shoemaker

If you do, you could earn great rewards, save money or even earn money. Some people think every credit card is the same plus or minus a couple tenths of an interest point. I use to. This couldn't be more wrong.

Do you do a lot of traveling? Do you have a large balance on a high interest credit card? Would you like to receive cash back on purchases?

Some credit cards offer points when you fly, purchase gas or dine out which can be redeemed for great rewards. So, if you do a significant amount of traveling look for a credit card that offers rewards for these types of purchases. The points you earn could be used on future flights and hotel stays.

If you have a huge balance on a high interest credit card, this is costing you extra money which could be avoided with a lower interest credit card. Look for a credit card that offers a low introductory rate on balance transfers and offers the standard APR thereafter.

Some credit cards offer you cash back on the purchases you make at certain retailers. So, If you use your credit card a lot, look for a credit card that offers cash back at the stores you frequent most.

Read also:
Debit card versus Credit Card
Basic Information of Credit Card