What is a credit card?

A credit card is a card that allows you to borrow money to pay 
for things. There will be a limit to how much you can spend 
called your credit limit. At the end of each month you can 
either pay off the whole of the amount you owe or make a minimum 
repayment.

Other kinds of cards include:

1) A cheque guarantee card, issued by your bank, that you can 
   use to ensure that your cheque will be honoured up to a 
   certain limit.

2) A charge card where you have to repay the full amount at 
   the end of each month.

3) A debit card, issued by your bank, where whatever you spend 
   is immediately deducted from your bank account


Do you need a credit card?

Using a credit card is a useful way of making purchases:

a) A credit card means you don’t need to carry huge amounts 
   of cash around and risk losing it.

b) A credit card means you can buy items over the internet.

c) A credit card means you can make purchases abroad without 
   having to worry about local currency.

d) A credit card gives the opportunity to spread the cost of 
   a large payment over several months.

e) A credit card is useful in an emergency, for example, an 
   unexpected repair to your house or car.


How do you choose a credit card?

The main two UK credit card issuers are Visa and Mastercard. 
These are accepted in most places and in 130 countries 
worldwide. Beware of less well known brands that may not 
be accepted everywhere.

Before you choose which credit card is the best for you, 
remember to read the terms and conditions carefully. Never sign 
up for a credit card without fully understanding what you are 
agreeing to.

Remember that all the plus factors will be prominently displayed 
in large print.

You may have to study the small print carefully to discover if 
there are any negative factors.


What You Need To Consider:

1) APR (Annual Percentage Rate)

   This is the rate of interest that you will pay on any 
   outstanding balance.

2) Special Introductory Rates

   You may be offered a low or 0% rate of interest for a 
   limited time (Up to 6 months) when you sign up for a new 
   card. A higher rate of interest may be charged for cash 
   withdrawals.

3) Balance Transfer Rate

   Card issuers may offer you a lower rate of interest if your 
   swap your balance from another credit card to theirs.

4) Interest Free period

   Remember to check when interest payments will begin. Will 
   you pay interest from the day of the purchase? Or will you 
   have a number of days interest free before you begin to pay? 
   There is usually no interest free period for cash withdrawals.

5) Cashback and Rewards

   Some cards over points or rewards for every pound spent on 
   the credit card. Make sure that these are appropriate for 
   you. For example, there’s no use collecting airmiles if you 
   never fly.

6) Minimum Repayment

   Remember to check what the minimum monthly repayment will be. 
   If you borrow £1000 on your credit card the monthly minimum 
   repayment will probably be in the region of £25. But if you 
   only pay this amount each month it will take a long time to 
   pay off the balance and cost a lot in total when you include 
   the interest payments.

7) Annual Fees

   This is the fee that the issuer will charge you every year 
   for using their credit card. Not all credit cards have an 
   annual fee, so remember to consider this when you are 
   choosing which one is right for you.

8) Late Payments

   There will be an extra charge, as well as the interest owed, 
   if your payment is late. This charge may even be more than 
   the amount you owe so be very careful to check what the 
   charge is, and to ensure that all your payments are made on 
   time. A good way of doing this is to set up a direct debit 
   from your current account.

9) Exceeding Your Limit

   You may also be charged a fee if you exceed your credit limit.


Will Your Application Be Accepted?

Whether or not your application is successful will depend on 
your credit rating. Your credit rating depends on your credit 
history (a record of your use of credit) and is based on the 
record of your ability to repay debt. 

You can obtain a copy of your credit file by contacting a credit 
reference agency. There may be a small fee for this service. 

When your application has been accepted you will be given a 
credit limit. The credit limit will be fixed when you first 
apply for your card (although you can ask for it to be increased 
or decreased later) and the limit, including the amount you have 
left available to spend, will be shown on your monthly statement.



Insurances and Protection.

What You Can Do: 

1) Take good care of your credit card to ensure that it isn’t 
   lost or stolen.

2) To prevent misuse of your card you must report any loss or 
   theft of your card to the issuer immediately. Many issuers 
   allow you to register all your cards with them so that in 
   the event of you losing a purse, handbag or wallet they can 
   all be cancelled with just one phone call.

3) You must keep all your receipts and also check your statement 
   carefully and report any suspicious transactions, for example 
   payments that you have no record of making.

4) Credit card companies are now issuing cards with PIN 
   (Personal identification numbers) which are known as Chip 
   and PIN cards. Rather than signing your name you will be 
   asked to enter your PIN onto a keypad. You must ensure that 
   you keep this number secret.


What The Issuer Will Do

1) The issuer should insure you against loss, misuse or theft 
   of your card.

2) The issuer may also insure your purchases for up to 100 days.

3) Your issuer may also provide protection against you being 
   sold unsuitable or shoddy goods.


Important Points To Remember:

a) Credit cards can be a very useful tool to help you to 
   manage your finances.

b) Choose your card carefully, remembering to read and 
   understand all the terms and conditions before you sign up.

c) Remember to set yourself a budget and decide how much you 
   will pay off each month.

d) Check your statements carefully each month.

e) Look after your card to prevent it being lost or stolen.


For the summary details of the latest offers on UK credit cards 
please visit http://www.1st-uk-credit-cards.co.uk/ 

Phil Edwards is a Business analyst in the city of London, 
freelance writer for several finance magazines and websites 
and co-owner of http://www.1st-uk-credit-cards.co.uk and 
http://www.1st-uk-bank-accounts.co.uk .