Credit cards.

Stoo61

I'm thinking about getting a credit card to pay for things of bigger value that I cant afford straight away.

Has any one had any bad experiences with this sort of attitude? Also, is it wise to get a credit card in order to build up some decent credit rating for the future.

I'm thinking I would never stray above £1000, set up a standing order from the current account and cut the card up when im ready. I earn but not lots.

Thoughts?

redvee

Getting a credit card will help your credit rating providing you keep up with the payments and never go over the limit etc. Don't be too surprised to have a limit increase within 6 months of getting the card if you're good. A site worth looking at is moneysavingexpert for the latest deals and tricks.

allthegearnoidea

if you do get one then Stick at one and Religously pay it off as set, its a very slippery slope, 1 card becomes 3 or 4 all with higher limits,
can become a way to get into trouble very quickly!! but if you are good and pay it off as soon as possible then you'll be okay!

otherwise, do what i do, have a seperate account at a different bank,i send any spare cash over at the end of the month which isnt a lot often but helps!! but if you set up your standing order to pay into that and then soon enough you'll have the cash there ready!!

redvee

If you pay off the balance filly each month the CC provider will hate you as they won't make any money from you. DO NOT use a CC in a ATM as you'll pay an extortionate rate of interest, ~20%, until the entire outstanding balance is cleared,m not just the amount you withdrew.

aidso

Also, things to look out for to entice you to a card are introductory 0% offers. I have a Tesco Credit card and as well as it giving me double points to spend in store on everything I purchase with it, I have 5% interest for 9 months - basically only pay what you owe.

A lot of people do something called "Tarting" which isnt as saucy as it sounds. Basically you do all your spending on your one card until the end of the zero interest offer, then apply for a new card with another bank and transfer any debt to them. What transpires is that you never pay interest *


* you will eventually pay interest when you run out of banks to apply to.

whyamihere

I have a CC with a £250 limit, for emergencies essentially. It's normally kept at zero balance, but it's nice to have that buffer there if required. I have a standing order set up so that the minimum payment is automatically paid every month, however much that may be.

Partly as a result of having it, my credit rating's superb considering my financial circumstances (I'm skint). I've never missed a payment on any debt I have (CC, phone etc) and I've never hit the limit. As a result, if/when I ever do need a larger amount of finance, it will be far easier for me to get approved than it would have been otherwise.

owenlars

Don't borrow money on credit cards under any circumstances, pay off fully each month. If you don't it will cost you at leas 20% plus a year. In other words for every £10 you have out on credit you will pay at least £2 interest. Given that current bank rate is 0.5% go figure how much money the cc companies make.

shm_uk

Good advice so far on this thread...

If you're spending at least £1000, wouldn't a loan be cheaper than a credit card?
(and if you're financially sensible/responsible I'd suggest there's no need to buy loan protection for such a small amount).

I currently have a £1000 24-month loan at £45 per month, which works out at £1080 to repay (~8%)... although I do benefit from a reduced staff rate...

VWsurfbum

I'll just add a horror story, a mate of mine is a shocking P**sshouse and is always in the pub, now he always pays money off the cards each month, and he has got a few loans in the past to consoladate them and pay them all off. instead of cutting up the cards he uses them again. i heard from another friend today that he was up to a £35,000 debt on credit cards and was refused a loan to pay them all off!
i dred to think what the minimum payments would be each month???
He doesnt earn bad, but him and his other half get paid, they are left with only £180 combined to get through the month :shock:

aidso

Well tbf that doesn't really sound like an issue with Credit Cards, more your buddy doesn't know how to handle his debts.

I think the main point people are trying to put across is "don't spend what you don't have". Having a CC helps with your Credit check and can assist your purchase of a house.

The Northern Monkey

whyamihere wrote:

I have a CC with a £250 limit, for emergencies essentially. It's normally kept at zero balance, but it's nice to have that buffer there if required. I have a standing order set up so that the minimum payment is automatically paid every month, however much that may be.

Partly as a result of having it, my credit rating's superb considering my financial circumstances (I'm skint). I've never missed a payment on any debt I have (CC, phone etc) and I've never hit the limit. As a result, if/when I ever do need a larger amount of finance, it will be far easier for me to get approved than it would have been otherwise.

Yup, I have a credit card for emergencies and also have the standing order setup.

I've used it a few times but always paid it off early. I wouldn't use it to pay for goodies.

I got a loan for my Commencal because I could get a better rate on the interest and the payments were smaller.
Only downside is I can't pay off more if I get a bit extra cash, so the extra cash goes in a savings account and will be used to pay off the balance when I can.

welshkev

my company credit card got cloned the other day, apparently i was in eastern europe somewhere the same day i was trying to pay for my hotel in birmingham

delta5

aidso wrote:

A lot of people do something called "Tarting" which isnt as saucy as it sounds. Basically you do all your spending on your one card until the end of the zero interest offer, then apply for a new card with another bank and transfer any debt to them. What transpires is that you never pay interest *

But don't forget you pay a balance transfer fee of about 3% of the amount transferred, which equates to a few months' interest.
Balance tranfers only work well if you:
1. take a deal for a long period (there are some good 15 month deals out there at the moment). I find http://www.fool.co.uk/credit-cards/ quite useful.
2. make sure the card you are transferring to has a ZERO balance before you do the transfer.
3. NEVER use the card to pay for ANYTHING else while it is carrying an 'interest free' balance transfer.

Reason for 2. and 3.: Look at the small print about how the banks allocate payments you make. They first reduce the 'interest free' part, and only AFTER that has been paid off do your payments start reducing other spending, like purchases.
For example, you do a 0% interest balance transfer of £1000. You balance is £1000 and anything you pay in reduces that. Great.
Now lets say you also use the card to buy a bike for £800. Your balance is now £1800. Anything you pay in reduces the 0% interest balance first, while the £800 sits underneath it generating interest for the bank. By the time you have nailed the £1000, the £800 could have cost you another £150 (or more) in interest.

Also, don't be tempted to use the credit card 'cheques' they send you. Those feckers are regarded as a 'cash advance' - they carry an extra hefty interest rate, and are usually also only paid off after everything else, including normal purchases.

chojin

I took out a tesco credit card to buy my Cube - it is interest free for 13 months, so cheaper than a loan.
If done right, credit cards can be the cheapest form of finance... however, if done wrong watch out

re-cycles

I'm not a fan of cards in general (I don't have any), but I do believe in the right hands they can be a useful tool. Sadly there are many who will spend because they've got the instant available credit, and not because they really need or even want the item.

Northwind

owenlars wrote:

Don't borrow money on credit cards under any circumstances, pay off fully each month. If you don't it will cost you at leas 20% plus a year. .

That's total nonsense. No nice way to say it, sorry.

welshkev

Northwind wrote:

owenlars wrote:

Don't borrow money on credit cards under any circumstances, pay off fully each month. If you don't it will cost you at leas 20% plus a year. .

That's total nonsense. No nice way to say it, sorry.

i think what he means is to actually get cash from a cash machine or over the counter

soy_sauce

i learned from my past that:

1) get one that is either 0% interest on purchase ONLY or 0% interest on balance transfer ONLY. because their APR normally lower than those offer both and the offer normally last longer.

2) one purpose per card - never use the same card for purchase and balance transfer. they have might have different interest rate and that you will end up paying for the lower rate debt first before the higher one.

3) never use it to withdraw cash from ATM. mentioned before by others and the above point also apply to that.

4) never pay JUST the minimum payment.

5) when you repaid the credit card fully and it doesn't have 0% interest for it anymore, DON'T cut it or cancel it. keep it as they will contact you in 6 to 12 months time and give you the 0% interest offer again. (normally for balance transfer)

Rindle

If your not planning on using it except in an emergency its also worth seeing what else the card offers you. IIRC some of them offer insurance on purchases or travel insurance.

ddraver

To put the other side....I did this too but unfortunately I am useless with money management and i'm now paying off near £350/month to cover the loan to consolidate that payment, whilst not actually paying anything off on the credit card i ve maxed again....

Do you trust yourself (I don't anymore! :oops: )

sfichele

I DONT LIKE TO BUY ANYTHING ON CREDIT

Instead I prefer to save up for the things. And if you think that might take too long then that in itself tells you something - either you are spending too much, or its gonna take ages to finally pay that loan off, during which you wont have spare cash for other stuff that you might want or need.

In general credit cards are rip off. If you don't manage your credit properly you'll take more time to pay the thing off than if you just saved - and it will cost you a lot more.

Stoo61

Well I went for it, I cant see it failing unless I lose my job which isnt going to happen.

Its for a one time big purchase and will give me plenty of time to pay it off.

I am not going to pay for anything else on it, I will put a standing order of 10% of the balance used from my current account and add extra as an when I can to do it quicker.

Seems like a win, win.

yoohoo999

Do people still live without a reasonable sized credit buffer?

Do none of you lot travel, for business or otherwise? I can't remember the last hotel I checked into that didn't want a CC (I spent 6 months out of the last 12 away on business).

There's times when a CC is more appropriate than your debit card. Purchase protection, preserving cashflow, CC company offered perks.

I've always got a Barclaycard with me, it's got a limit that would bail me out of any situation short of capture by Somalian pirates, and I get decent perks with it.

I just can't imagine not having that sort of instant access, worldwide accepted protection. I've got a savings account that gets topped up and then drained (see Cove Shocker WIP ) but a CC is a necessity for me.

I broke my arm badly when i was off piste in Val d'Isere and was too delerious to sort out my insurance details at the time. I had to pay mountain rescue and the hospital before they would let me go....£12k. Would have been screwed without a CC, couldn't even remember the company I had my annual insurance with never mind the policy number!

welshkev

yoohoo999 wrote:

Do people still live without a reasonable sized credit buffer?

Do none of you lot travel, for business or otherwise? I can't remember the last hotel I checked into that didn't want a CC (I spent 6 months out of the last 12 away on business).

)

i have a company credit card with a £2k limit that i use for my hotels etc. i do have a credit card but it has a £500 limit so it's enough to bail me out but not too much that i can go mental and go splurging cash - my limit used to be about £9k but i dropped it to save me worrying that i'd spend it