What is the Annual Percentage Rate (APR)?It is the APR that determines how much your credit card debt costs you each month. Credit card lenders are required by law to quote the APR to give consumers some way of comparing different credit card offers. However, because of the way that different credit card companies calculate the interest you owe, the APR may not always be a completely reliable method of comparison. Be sure you understand how charges apply to a particular card - such as the date from which interest is charged (statement date or transaction date?) and the number of interest-free days you get.
What charges and fees should I look out for?Few card companies these days levy an
annual fee simply for the privilege of having one of their cards. None of the cards in our best buy tables charge an annual fee.
Balance transfer fees are increasingly being used to discourage consumers from switching from one introductory rate to another to avoid paying interest. All our credit card best buy listings carry full details of any balance transfer (BT) fees charged. Also see our credit card articles to learn more about how to get round these fees. Not all cards levya fee on a BTand the amount chargedvaries from around 2% to 3% at the moment.
NB:Many card companies no longer cap the amount charged as a BT fee. This means that transferring a balance of £5,000 to a card charging an uncapped 3% fee will cost you £150. It pays to do your sums before switching.
Late payment charges charged by card companies have been the subject of an Office of Fair Trading investigation. Card providers may now only levy a charge to cover their admin costs in chasing a late payment. They may not levy a punitive charge on customers. This has brought late payment fees down to around £12 from £25 typically.
The best way to avoid late payment fees (apart from not over-spending) is to ensure that you set up a direct debit for at least the minimum payment as soon as you take the card out.
NB: Always ask this question; "Will my direct debit be active in time to pay my first payment?" If not then you must make a note of the due date and make a manual payment to your card account. Card companies make a packet on late payment fees from people falling foul of this trick. Worst still, they are within their rights to withdraw any introductory interest rate offer if you miss a payment. If this happens complain firmly but politely and insist that the introductory rate is reinstated. If this does not work then transfer the balance elsewhere - don’t throw good money after bad.
What if I Have a bad credit history? If you have been refused credit before, or you are worried that you might have a bad credit history, then it is a simple matter to check your credit file. Contact
www.checkmyfile.co.uk,
Equifax, or
Experian. You have a statutory right to see the information that credit reference agencies hold on file about you. In exchange for a small charge (normally £2) you will be able to see, and potentially dispute, the information about your credit history and the credit history of people who may be financially connected to you.
How importantare cashback, air miles, reward points and charity donations? The fact that some credit card deals offer cashback and other perks on purchasesshould not be a major factor in your decision to choose one credit card deal over another - unlessyou pay off your balance each month in full.If you do pay your balance offevery month,particularly if you are a big spender,cashback or other rewards are worth having.
Cash advances/foreign currency: Avoid cash advances and buying foreign currency with your credit card. Both attract high levels of charges and/or commission. Also avoid using your card to make purchases abroad as you will pay a handling charge of around 2.5% for the privilege. If you do have to use your card don’t opt to pay in local currency rather than in sterling as the exchange rate used to calculate the cost is normally really, really bad. By far and away the best card for foreign currency and purchases abroad is the Nationwide Classiccard.
