Too Many New Credit Cards, Your Credit Score, and Mortgages

Basics

Your credit report will list your creditors by:

When the credit line was opened the maximum available balance the current balance on the credit line your credit line lines on a credit report are any extension of credit that has been made to you, such as a credit card, department store card, car loan, or student loans among other creditors. When The Credit Line Was Opened This is the month and year the new line of credit was extended.

Even if you applied for a credit card only recently it is quite likely to show up on your credit report. Creditors often report data to credit bureaus quite quickly, and that is how your credit report remains up to date. Don’t count on a new line of credit not showing up on a credit report. It may not show up, but it often will.

Maximum Available Balance

Your credit report will state what the maximum available balance is for each credit line. If you add five credit cards and each of them has a maximum available balance of $10,000 then you have just increased your available credit by $50,000.

From a mortgage lender’s perspective additional available credit represents a potential risk to them. If you take on too much additional debt you may not be able to pay your mortgage properly.

Current Balance on Credit Line

Your credit report will list your current balances on each credit line. It is usually up to date. If you have a lot of new credit and have started to use it, your credit card balances may show up on the new credit report.

Credit Card Security

The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen.

The goal of the credit card companies is not to eliminate fraud, but to "reduce it to manageable levels"^[5], such that the total cost of both fraud and fraud prevention is minimized ^{[citation needed]}. This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction.

Most internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the web server to someone who manually processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank, a security risk is created. However, many banks offer systems such as Clear Commerce, where encrypted card details captured on a merchant's web server can be sent directly to the payment processor.

Controlled Payment Numbers are another option for protecting one's credit card number: they are "alias" numbers linked to one's actual card number, generated as needed, valid for a relatively short time, with a very low limit, and typically only valid with a single merchant.

The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for prosecuting criminals who engage in credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding US $5000 in value. Three improvements to card security have been introduced to the more common credit card networks but none has proven to help reduce credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamper-resistant smart cards which are intended to make forgery more difficult. The majority of smartcard (IC card) based credit cards comply with the EMV (Europe MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the back of most cards, for use in "card not present" transactions. See CVV2 for more information.

The way credit card owners pay off their balances have a tremendous effects on their credit history. All the information is collected by credit bureaus. The credit information stays on the credit report, depending on the jurisdiction and the situation, for 1, 2, 5, 7 or even 10 years after the debt is repaid.

Grace period

A credit card's grace period be the time the customer has to pay the balance before interest is charged to the balance. Grace periods vary, other than usually range from 20 to 30 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement later than certain conditions are met. Usually, if a customer is late paying the balance, finance charge will be calculated and the grace period does not apply. Finance charge(s) incurred depends on the grace time and balance, with most credit cards there is no grace period if there's any outstanding balance from the before billing cycle or statement (i.e. interest is applied on together the previous balance and new transactions). However, there are some credit cards that will just apply finance charge on the previous or old balance, not including new transactions.

How credit cards work

A user is issued credit after an account has been approved by the credit provider, and is given a credit card, with which the user will be able to make purchases from merchants accepting that credit card up to a pre-established credit limit. Often a general bank issues the credit, but sometimes a captive bank created to issue a particular brand of credit card, such as Chase Credit Card, Wells Fargo or Bank of America issues the credit.

When a purchase is made, the credit card user agrees to pay the card issuer. The cardholders indicates their consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a Personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a Card not present (CNP) transaction.

Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is in the United Kingdom commonly known as Chip and PIN, but is more technically an EMV card.

Other variations of verification systems are used by e commerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholders providing additional information, such as the security code printed on the back of the card, or the address of the cardholders.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the card holder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the card holder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts.

Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.

For example, if a user had a $1,000 outstanding balance and pays it in full, there would be no interest charged. If, however, even $1.00 of the total balance remained unpaid, interest would be charged on the $1 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a card holder agreement which may be summarized on the back of the monthly statement. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. Financial institutions refer to interest charged back to the original time of the transaction and up to the time a payment was made, if not in full, as RRFC or residual retail finance charge. Thus after an amount has revolved and a payment has been made that the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid...i.e. when the balance stopped revolving).^[1]

The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, either to encourage balance transfers from cards of other issuers, or to encourage more spending on the part of the customer. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue. As the rates and terms vary, services have been set up allowing users to calculate savings available by switching cards, which can be considerable if there is a large outstanding balance (see external links for some on-line services).

Because of intense competition in the credit card industry, credit providers often offer incentives such as frequent flier points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their program.

Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.

Credit card

A credit card is a system of payment named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most credit cards are the same shape and size, as specified by the ISO 7810 standard.

What to Consider when Filing for Personal Bankruptcy

By: Roy Barker

President Bush in April sign into law The Bankruptcy Abuse and Consumer Protection Act. This bill promises a lot of changes to law, and will make it more difficult for the average person in financial trouble to have debts detached with bankruptcy. Recent social and economic changes indicate that those considering a bankruptcy should do so now, as the queue is getting longer.

It will be currently be harder to file under Chapter 7 of the code, which allows the courts to wave customer debt and give the debtor a new start. Filings posted will be tested and those who have a polite income it seems will have to file under a more strenuous Chapter 13, which demands repayment by installment and the assistance of a lawyer. Now looming, bankruptcy filings are not only upper than they were previously, but are also higher than expected. Across the country, filings are considerably higher than last year, and some bankruptcy practitioners say that their business has improved dramatically.

To make it more confusing is another law, which require credit card companies to establish a payment schedule that permits customers to repay debts in amended installments. Since early year, most credit card provider has doubled their minimum payments. A regular person with say $12,000 in credit card debt will have approximate monthly payment increases from between $150 to $450, an amplify most people can ill afford.

This increase in bankruptcy filings have overwhelmed bankruptcy lawyers, who face a burden of being liable for fake information filed by clients once the new law takes effect. Certainly it just unwelcomes change. This additional liability, as one with the additional tasks, has prompted many lawyers to raise fees substantially over the same time as last year.

What does this mean for bad debt? From here on, bankruptcy filings will be extra confusing, complicated and expensive. The system is already overloaded with bankruptcy cases. If you suspect you're in the bankruptcy category, you must move on it now. Waiting even one more day could be too late.


A contribution from Roy Barker owner and publisher of www.bankruptcy-aid.coma resource for attorneys and anyone seeking information.

Improving your Credit Score - The 5 Things You Can Do

By Anik Singal

Were you recently denied for a loan or a credit card? When you apply for a loan, there are only a few factors that actually impact whether you get approved not. A part of the decision is based on the information you submit to the organization, however a much larger portion of the decision is based on your credit score.

So, if you were declined for a loan, it is very likely simply because you have a bad credit score. The main way to get a bad credit score is to have a lot of open credit or to have had a lot of late payments (in some cases, no payments made at all).

Financial institutions such as banks, car companies, lending agencies, credit cards and many others use your credit score as a wage of your ability to pay off the credit card. Not only can having bad credit work against you, but also NOT having any credit can be bad.

You would think that not having debt would be a positive thing, however, if you have no debt, no credit card, then there is no way for the credit reporting agencies to track your ability to pay - so that is why it can actually be recommended to get a credit card with your name on it when you’re young (just make sure the limits are very low and that you pay off every penny on time).

The factors that work against your credit score are the following:

1. The number of accounts opens

2. Any late payments with your credit card bills.

3. Any payments not made

4. Any reported liens against you

5. Any financial claims against you

Most of the larger organizations will quickly report you to the credit agencies when you fail to pay them on time. This is mostly there way of making sure you pay them, or else they can really hurt your credit.

The worst of it is when your credit report is hurting when it was not even your fault. Yes, identity theft and/or wrong reporting by a financial institution happens all of the time.

This is precisely why the government has made a law that allows you to see your credit report once a year at no cost from all 3 of the major reporting agencies.

So how do you improve your credit report?

1. Pay off as many debts as you can and close accounts.

2. Solving any disputes against you.

3. Checking your report once a year and making sure all claims are true - dispute anything that is false.

4. Never leave a credit card open unless you are using it - even if you have no debt on it.

5. Never make late payments.

Always remember that you can easily improve your credit rating even if it is bad right now.

Learn more about how to debt consolidation and improving your credit score. We have over 1,000 articles all focused on helping you improve your personal finances, reducing your debts and increasing your credit score.

Do Insurance Companies Really Check Your Credit Score?

By Anik Singal

With technology booming, the internet and how easy it is for companies to network into databases such as the "credit reporting" databases, more and more companies are able to find out more information about you quicker. This is also helping them get a more accurate view of you.

Insurance companies are no different; they are now reviewing your credit scores as a way to determine how "trustworthy" and "responsible" you really are. For years now, they have been giving "good student" discounts to students. They assume that good grades reflect on the level of responsibility of the student.

Why would it be any different with adults and their credit scores? Research has firmly proven that those with poor credit reports are less responsible across the board and more likely to be a risk to insurance companies.

However, many critics are still arguing that the two have nothing to do with one another and that the practice is completely illegal.

You can basically think about it as that you are now also getting an "insurance credit score" that takes your financial credit score, your accident history, your age, your demographics and other matters into account and then assigns you with a number. They key factor here is that now your financial position is going to begin impacting the quotes that insurance companies give you or whether they accept you at all or not.

The defense of an insurance company?

Studies have clearly shown that most of those who do poorly in credit scores are the most likely to have to make an insurance claim. In other words, how someone is handling their financial affairs can reflect their habits in other areas of their life as well.

However, the major critics of this are arguing that this system is skewed to work against low income households. The argument is that these people are not necessarily "less responsible" but just less capable due to lower incomes. However, whether this should reflect on their level of personal responsibility with is being argued as unethical and maybe even illegal.

For now insurance companies are still checking, but perhaps this will one day not be allowed?

One of the best ways to help improve your credit score is to use a low interest debt consolidation loan to help you close your multiple debt accounts.

This will help you organize your debt and increase your credit score hence helping you improve your chances for good insurance quotes.

Credit Score Range - What is Good Credit

By Anik Singal

The commons credit score range that the credit bureaus use and that most of the large financial institutions accept is between 300 and 850. Also, the organization that is considered to be the leader in accurate credit scoring, FICO (Fair Isaac Corp.) also uses the same range.

These two numbers can literally change your life and can impact every aspect of your living style. If you have an 850, you can pretty much do anything - buy a house, get a nice car, have credit cards and get approved for any loan you want. But, if you have a 300, good luck getting approved for anything, even a credit card will be near impossible.

Wait, what, just because I have bad credit, I can’t even get a credit card?

Ok, so maybe I exaggerated a bit? Actually, people with bad credit CAN some times get approved for a loan or for a credit card; typically it will just be at a very high interest rate. And, vice versa, people with very high credit have also been known to no get approved. However, your odds are MUCH more in your favor with good credit than with bad credit, try your best to always stay closer to 850.

Most financial institutions really have nothing else to use as an indicator other than your credit score in the range.

What is considered a good credit score?

A good credit score is typically a credit score in the range of 700 or higher. Actually, 700 or higher is typically considered to be excellent credit. This basically gives you a very high probability of getting approved for your desired loan or credit card.

For more a more detailed look at the way some financial institutions look at credit scores:

720 and above - Excellent

680 to 699 - Good

620 - 679 - Average

* Most people in the United States are in the range of 620 to 679. Anything below 620 and we start to get into the low credit score range.

What is considered to be a low credit score?

A credit score between 580 and 619 is not looked upon well and considered to be low. But, again, it does not mean that you will not get approved for a loan - you will likely just pay a much higher interest rate.

What is considered to be a bad credit score?

Anything below 580 and you really need to work on your credit because even getting approved for something will be difficult, if not impossible. Typically credit scores this low are a result of a recent bankruptcy.

One of the best ways to help you increase your credit score is to not have too many forms of credit and debt open, you should look into Cards to further help you consolidate your debt, increase your credit score and decrease your interest rate.

Types of Credit Card Accounts

Credit grantors generally topic three types of accounts. The fundamental terms of these account agreements are:

Revolving Agreement
(Typical Credit Card Account)

You may pay in full each month or prefer to make a partial payment based on the outstanding balance. If you make a fractional payment, you will be charge interest (a "finance charge") on the portion of the balance you do not pay. Department stores, gas and oil companies, and banks typically issue credit cards based on a revolve credit plan
Charge Agreement

You promise to give the full balance each month, so you do not have to pay interest charges. Charge cards and charge accounts with local businesses frequently require repayment on this basis.

Installment Agreement

You sign a contract to settle up a fixed amount of credit in equal payments over a specific period of time. Automobiles, furniture, and main appliances often are financed this way. Personal loans generally are paid back in installments, too.
1. Do you need a card?
What you will learn in this step: like it or not, it is hard to live without plastic.
For most people, credit cards are type of buying now, paying later – they are bringing forward purchases of good and services such as clothing and holidays rather than waiting until they have got the cash in the weeks or months ahead.
Those with good habits will pay off their credit cards balance each month - or at least a good portion of it. They used their credit card to "smooth" out their spending over the course of the year.
Unfortunately, for a some of people credit card isn't so fantastic. They're using their cards to buy things they want but cannot really afford now or later. They can't pay their card off in full at the end of the month, and their debt seems never ending.
That said, in this day and age it's a big step to live without a credit cards. Have you ever tried buying something to by phone or on the internet without a card at hand? How many time have you handed over a credit card, complete with signature, as identification? How much hard is it to pay your bills in person as banks and businesses close physical branches?
Like or not, credit cards are part of life for most people. That's why pay to be familiar with the different characteristics of the various types of cards, so you can choose the right mixed of interest rate, fees and features for you. Once you have got a card, handle it with care.

How to Establish Credit

A positive credit history is an asset, not only when you apply for a credit card, but also when you apply for a job or insurance, or when you want to finance a car or a home. Here are three major ways to start establishing a credit record for yourself:

• Consider applying for a credit card issued by a local store and use it responsibly. Ask if they report to a credit bureau. If they do, and if you pay your bills on time, you'll establish a good credit history.
• Consider a secured credit card. To obtain a secured credit card, you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional non-secured cards.
  
• Consider asking someone with an established credit history - perhaps a relative - to co-sign the credit card account if you do not qualify for credit on your own. The co-signer promises (guarantees) to pay your debts if you do not. You will want to repay any debt promptly so you can build a positive credit history and apply for a credit card in the future on your own.

If you are turned down for a credit card, ask why. It may be that you have not been at your current address or job long enough, or your income may not meet the issuer's criteria. Different credit card companies have different standards. However, if several companies turn you down, it may indicate that you are not ready for a credit card.

What if things go wrong?

If you are unable to meet your monthly repayments and are struggling to repay your outstanding balance, you should immediately contact your credit card issuer. The earlier you approach them, the more sympathetic they will be to your situation. Alternatively, consider switching your card to one with lower rates and fees before you become too bogged down with your repayments but beware - if you leave it until it’s too late you may find getting accepted by a new company is a hurdle you may not be able to clear.

If you are refused a credit card and wish to make enquiries concerning your own credit file you can apply to the credit reference agency for your record. Credit reference agencies provide a detailed analysis of your own financial position. In particular your past repayment history, any County Court Judgements or defaults registered against you, electoral roll details and previous credit searches made.

How do I apply credit card?

You can apply for a credit card without leaving this site. If you haven’t already used the hot links to go direct to a card comparison table then click the button below to find the card that best suits your circumstances.

Choosing the right card(s)

To get the most out of your credit card it’s important to decide whether it’s actually suited to the purpose for which you intend to use it. It’s surprising how many people use a card that doesn’t fit with their spending or repayment habits, and as a result end up paying more than they need for the privilege. A credit card is a useful tool if you make it work for you, but remember you can always save money in interest charges by finding a better deal - the market’s awash with them at present. Beware though, card issuers do have tricks up their sleeve and often manipulate their terms & conditions in order to claw back interest in other ways. The best way to avoid such tactics is to use a different credit card for each different purpose, that way you’ll be getting the most out of your credit card for as little cost as possible. So which card is best for you? Our guide to spending and repayment habits may help you to decide.

• Regular spender; balance always cleared in full each month

You’re often using your card for purchases - perhaps it’s the household shopping or your trips to the petrol station - but you clear the debt in full each month. Under these circumstances the interest rate charged is irrelevant unless there’s no interest-free period, in which case you’ll pay interest regardless of how quickly you clear your balance. Many cards offer an interest-free period of up to 59 days from the date of the transaction, which gives you some breathing space before your payment’s due. Choose a card with no annual fee and decide whether you’d like to earn a reward or cash back, but ensure the scheme on offer gives you a worthwhile return on your spend. Both cash back and reward schemes come in all shapes and sizes and as a result some are more generous than others. One of the best ways to guarantee you’ll always clear your outstanding balance is to set-up a direct debit for the full amount each month.
Click to compare cash back credit cards, click to compare credit cards with a loyalty/reward scheme or click to compare credit cards by longest interest free period

• Regular spender; balance usually cleared in full each month

So you like spending on your card and you’re pretty good at clearing your balance from month-to-month but just occasionally you choose to carry a balance forward. It doesn’t sting quite so much if you’ve prepared in advance by catering for this very situation. In this situation it makes sense to choose a card that offers a low standard rate, that way interest charges for those months when it is applied aren’t too hefty. Choose no annual fee, and if possible select a card with a reward or cash back scheme. It’s worth noting that these schemes are not always available on the cards with the lowest rates so do your calculations before you opt for one.
To compare standard interest rates click here

• Regular spender; balance rarely or never cleared in full each month

If you’re regularly using your plastic and rarely or never repay the debt in full your best bet is a card with an introductory purchase rate or an ultra low standard rate. Choosing a credit card with a low standard rate will help to save you money if you can’t be bothered shopping around when the introductory period expires. In addition, if you’ve built up a debt on your existing card then it’s time to consider switching to a credit card also offering a low balance transfer rate. There are plenty of cards offering ‘double deals’ - a low introductory rate combined with a low balance transfer rate (often 0% for both), although the duration of the offer will vary so it’s worth shopping around. Depending on the deals on offer, two separate cards for your purchases and balance transfers shouldn’t be ruled out. If you do opt for an introductory rate then you’ll need to change to a new low rate credit card once that deal ends, otherwise you’ll pay interest at the standard rate. There are cards with long-term balance transfer deals and if you think you’ll be a bit slow to switch then these may be your cheapest option. Click to compare credit cards offering both an introductory purchase rate and a balance transfer rate alternatively, compare all balance transfer credit cards or introductory purchase rate credit cards

• Existing debt which you’re determined to clear

If you’re determined to clear your outstanding balance - a typical credit card debt in the UK in 2003 was £2,200 (Source: Credit Management Resource Centre) - you need to assess just how long it’ll take you & how disciplined you’ll be with your repayments. If you’re only covering the minimum payment each month then your debt could potentially take years to shift as you’ll be repaying little more than the monthly interest charges. Pay off a fair chunk on a monthly basis and you’ll be clearing capital as well as interest, and ultimately your debt will be reduced far quicker. Either way, it’s important to find the card that’ll help to save you the most money. There are always plenty of cards offering 0% on balance transfers, usually over a term of 5 to 9 months. Switching to a 0% card really makes sense because all the repayments made during this period will reduce the capital outstanding, therefore the outstanding balance will be much lower at the end of the introductory period. Ideally, once one introductory offer expires you’ll transfer your balance to a new card and as a result will continue to avoid interest charges.

As an example, a person transferring a £2,000 balance from a credit card with a standard APR of 14.9% to a credit card offering 0% for 9 months would reduce their outstanding balance by £630 providing they repaid £70 per month and did not add to their balance. During the nine months they’d also save £202.55 in interest charges, proving that transferring your balance to a 0% credit card really does pay.

If you suspect you’ll be a little slow to switch when the introductory period expires then a card with a low rate guaranteed for the life of the balance could well be your best bet. Whichever card you choose remember that any new spend will be charged at the standard rate and, in the majority of cases, will be cleared after any debt charged at the promotional rate. Click here to see how much you can save or click here to compare all balance transfer rates, including 0% deals

• Poor Credit History or difficult circumstances

It can be difficult to get a credit card if you’ve no previous credit history, have CCJs, arrears or defaults, have changed addresses frequently or are self-employed. There are card issuers who can help in these circumstances, although the rate you’re offered is likely to be based on an assessment of your circumstances and as such may be different than the typical rate quoted. The plus point is this type of card, when it’s used and maintained properly, can help to build or rebuild your credit rating. Click here to compare ‘bad credit’ credit cards & ‘near prime’ credit cards

• Special Uses

Withdrawing cash
Withdrawing cash on credit cards is never recommended as you’ll generally be stung by high interest charges and added fees. It’s well worth knowing the pros and cons before you start, and familiarising yourself with the terms of your card is a must for anyone considering drawing cash off their credit card. You’ll generally be charged from the date of the transaction so there’s no interest-free period. If this isn’t bad enough, you’ll also be hit by a set fee or percentage of the amount withdrawn just for using the facility. Occasionally card issuers do offer promotional rates on cash advances, sometimes as low as 0%, although consideration should also be paid to cash advance fees and conditions.

Use abroad - know before you go
If one of your most important travelling companions is your credit card then you need to assess just how much it’s costing you to use it overseas. You’d probably be surprised at the way your bill is bumped up when you make foreign transactions or cash withdrawals, as credit cards have extra charges when used abroad. Credit card exchange rates are based on the Visa and MasterCard wholesale rates, with a loading percentage usually added by the card issuers. This can vary from 0% to 2.75% depending on the credit card. The actual rate applied may vary between EU and non-EU countries so it’s well worth checking this out before you travel. The loading will be applied to withdrawals made at foreign ATMs as well as when your card is used to pay for goods and services. As it’s an exchange rate it’s in addition to the set fees in place for withdrawing cash, and of course you’ll pay interest at the standard or introductory rate (if not 0%) for both cash withdrawals and purchases. When selecting a credit card for use abroad it’s also worth paying some consideration to the other facilities on offer, such as the provision of a replacement card in the event of the loss or theft of your own. Extra benefits may include an international assistance package and insurance for flight delay, lost and delayed luggage and personal injury. To make choosing a UK credit card for use abroad a little easier we’ve dedicated a whole comparison table to the cause and you can view this by clicking on the link.

Added benefits
Many card issuers reward their cardholders with a range of useful benefits, and these can prove to be a valuable asset to any household. Examples include domestic warranty cover that’ll protect your electrical purchases for up to a year after the manufacturer’s warranty expires, price promise cover that ensures you’ll be refunded the difference should you purchase an item and then find it cheaper elsewhere (including in the January sales), and free purchase protection insurance to cover your purchases against loss, theft or accidental damage for a specified period. You can compare credit cards offering free purchase protection

Donations to charity
Charity cards cover a whole range of good causes and are issued in partnership with the charities themselves. Usually a one-off amount is donated when you first open the account or use your card and in many cases an ongoing donation is made by the card issuer, usually based on a percentage of your spend - all at no extra cost to you. There’s plenty of choice, no matter where your interest lies. To do your bit for worthwhile causes click here

• Other

Price-for-risk
Some card issuers use a price-for-risk strategy to determine the rate of interest you’ll pay. In basic terms this means an assessment of your personal circumstances and credit history will be conducted and from this you’ll be offered one of a number of rates. The rate you are offered may be different than the typical rate quoted but this type of pricing often means the card issuer can accept more people for more cards. Look out for our price-for-risk indicator.

Down-selling
Many credit card issuers are able to offer credit cards to more people through the practice of “down-selling”. By down-selling their products card issuers can offer an applicant an alternative product when they fail to qualify for the product they applied for. One of the reasons for down-selling is an applicant’s failure to qualify on annual income, for example a person who has applied for a platinum card may not meet the minimum income requirement and as a result will be offered a classic or gold card. This practice is different from pricing-for-risk and the two should not be confused.

Allocation of payments
Unless you clear your balance in full each month it’s worth paying some attention to the small print surrounding the allocation of payments, otherwise known as the payment hierarchy. Manipulating the payment hierarchy is one of the sneakier methods of clawing back interest currently used by card issuers. It explains how the repayments you make will be used to clear your outstanding balance, and unfortunately it is never as simple as oldest item first. Often balances at promotional rates are cleared before balances at the standard rates, which sees your outstanding balance accumulating interest at a higher rate for a longer period. For example, your transferred balance at 0% p.a. would be cleared before your new spend at 15.9% APR, which could leave you feeling the pinch. Depending on how you use your card, or intend to use it, the payment hierarchy may carry as much weight as the interest rates on offer so bear in mind that disregarding it could end up costing you dear.

Summary or “Honesty” box
From March 2004 all credit card issuers will be obliged to summarise their key product features such as interest charges and fees in an easy-to-understand format, known as a summary or “honesty” box. This will appear in all credit card marketing information, making it easier for consumers to compare deals and assess the implications of opening an account. As part of this overhaul each credit card company will be required to calculate annual interest rates on credit cards using one agreed method rather than one of the two methods used at present.