Since their mainstream penetration into the UK market during the early 90s, the credit card has become a major aspect of many consumers’ financial lives. Whether you have come to love or loathe your credit card, chances are you couldn’t get by without it.
The following is a list of 10 aspects that you should be wary of when using a credit card, along with some tips on how to avoid the common pitfalls associated with them.
Payment Hierarchy
A payment hierarchy is a system that nearly all lenders employ, to ensure they get the most interest out of their consumers as possible.
Put simply, a payment hierarchy can work either negatively, resulting in more expensive debts being paid off last; or positively, where cheaper debts are paid off last. The latter of the two is obviously the most desirable, as it will result in less interest being incurred.
One way to avoid this is by opting for a card that offers 0% interest on both balance transfers and purchases. Alternatively, although they are less common, it is possible to find a card that operates a positive hierarchy.
High APRs
It's estimated that interest rates on credit cards hiked up by 1 to 3 percent last month (June ’08), with the average interest rate now in the region of 16%. There are of course exceptions, and the best way to find these is by utilising online comparison sites.
If you find yourself constantly switching lenders to take advantage of the 0% balance transfer rate, then it may be worthwhile opting for a lifetime balance transfer card instead. Not only will this avoid the balance transfer fee imposed by most lenders, but it will ensure that the interest rate remains low for the lifetime of the balance.
Card Charges
For a long time lenders were able to charge whatever they saw fit when consumers went over their agreed limit or missed a re-payment; now though, this charge is capped at £12.
Although this charge can still prove troublesome for some, the only way to avoid it is by keeping on top of your finances, ensuring that you will be able to meet the required repayments each month.
Balance Transfer Fee’s
As mentioned above, these fees are imposed when you wish to transfer your balance from one lender to another. This is an excellent way of chasing 0% interest deals; however, lenders caught onto this and now charge around 2 to 3 percent to transfer your balance.
Obviously the larger your credit card balance, the more costly this is going to prove, the idea being to maintain your custom. Thankfully, there are a handful of lenders that do offer credit cards that do not impose such fees. The internet is an excellent place to source such credit cards.
Please Rate this Article
Click the XML Icon Above to Receive Credit Articles Via RSS!
