Credit cards... how do they work? (serious thread)

Thanks all

atpbx said:
The interest is never added to the balance on the card.

You pay ALL the interest for that month in the minimum payment+ the minimum 5% of outstanding balance which makes up your bill at the end of the month.

How do people not know this?
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This makes sense. I guess no interest applies when paying the outstanding balance during the grace period, right?

Zethor said:
The shops in which you use your card pay a commission for every transaction, which means all clients are good business for banks.
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Oh, forgot about that :P By the way, I believe I read somewhere that credit cards are not recommended for cash withdrawals. Is that correct?
 
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Credit Cards are things that some people find terrifying despite having absolutely no idea how they work. I blame the parents.
 
khodos said:
Thanks. By the way, I believe I read somewhere that credit cards are not recommended for cash withdrawals. Is that correct?

What do you guys think of this CC? https://www.metrobankonline.co.uk/Personal/Borrowing/Credit-Card/

I already have an account with them so it would be easier to get one from them.
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You have to check with the card you get, but most will charge you for withdrawing money even if you pay back your bill at the end of the month.
 
The "withdrawing money" bit is a bit confusing.

If you mean you will go to an ATM and withdraw cash from the card then you will not normally be charged a fee to do so at the time. Most card providers will start charging interest on cash withdrawls immedaitely though (menaing there's no period of interest-free usage) and also often charge a higher rate of interest than the standard prevailing rate.

This should only really be done in a real emergency or where you can repay in the very short terms - obviously depedent upon personal circumstances there may be no other option, but if avoidable, it should be.
 
I think you're wrong there, pretty much all CC providers charge a percentage of your transaction as a fee with a minimum also (usually £3 or so).

God damn you person above. :p
 
All I look at when making any purchases on my CC is whether I can afford to pay off the balance in one go at the end of the month, if not then I ensure that I don't make that purchase until I have the money saved up first.

For example, I knew that my car insurance was due in February so I made sure that I saved through the months of December and January (difficult time of year to have to do that :p) so that when I came to pay my car insurance I could put it on the CC safe in the knowledge that I had the balance in my account to pay it off in one go whilst still giving me money in my account for other things.

I find it so much easier having the entire balance being paid off automatically each month, you just have to be disciplined with using the CC in the first place, as I know people that have run up big debts on multiple cards very quickly.
 
khodos said:
Thanks. By the way, I believe I read somewhere that credit cards are not recommended for cash withdrawals. Is that correct?

What do you guys think of this CC? https://www.metrobankonline.co.uk/Personal/Borrowing/Credit-Card/

I already have an account with them so it would be easier to get one from them.
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It really depends on your circumstances. The CC section of Moneysupermarket gives you a rsting out of 10 for your likelihood to be accepted, which uses your credit score for reference but doesn't mark your credit file with a search. My friend wanted to apply for the Barclaycard Platinum, didn't think he would get it so I told him to use that. 9/10 chance, and he got it with a £5,400 limit. He's currently on long term sick so it came in handy.
 
Zefan said:
Credit Cards are things that some people find terrifying despite having absolutely no idea how they work.
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They should quite rightly be very careful with them. Misuse them and it can royally screw up your life

One thing secondary school desperately need is lessons in personal finance.
 
robgmun said:
They should quite rightly be very careful with them. Misuse them and it can royally screw up your life

One thing secondary school desperately need is lessons in personal finance.
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It's amazing that amount of people my age, 20, that think that a Credit Card is this scary monster that will swallow all your money and get you in debt. Just be responsible with your money and you will be fine. To be honest you might get a limit so low that you can't really get yourself in debt anyway.
 
It's the people who can't...

MikeTheNative said:
...be responsible with your money and you will be fine.
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who think...

... that a Credit Card is this scary monster that will swallow all your money and get you in debt.
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And they're right to be concerned. Credit cards are very easy ways to borrow serious amounts of money. And way too many people have no idea how to handle money properly and use credit cards safely. Better to be scared of them than misuse them and end up in debt you can't clear!
 
=XDC=FluphyBunny said:
Many credit cards that I have seen charge for cash withdrawals, for example 3% with a £3 minimum.
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Except for a few cards like the Halifax Clarity card. No fee and no commission. :cool: You just pay interest on the amount, which can amount to just pennies if you pay the balance back quickly. I use my Clarity to withdraw cash when abroad.
 
schumi84 said:
All I look at when making any purchases on my CC is whether I can afford to pay off the balance in one go at the end of the month, if not then I ensure that I don't make that purchase until I have the money saved up first.

For example, I knew that my car insurance was due in February so I made sure that I saved through the months of December and January (difficult time of year to have to do that :p) so that when I came to pay my car insurance I could put it on the CC safe in the knowledge that I had the balance in my account to pay it off in one go whilst still giving me money in my account for other things.

I find it so much easier having the entire balance being paid off automatically each month, you just have to be disciplined with using the CC in the first place, as I know people that have run up big debts on multiple cards very quickly.
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I've had to stick bike insurance on the card this week, i had to have it done yesterday and get the documents over to the dealer so i couldn't put it off.

On a normal month this would be fine, this month its not as:

2k on Saturday for the deposit.
1k on some work on the roof of the house.
£750 for the conversion to turn a brick outhouse into a garage.
Riding gear- £500.
All in the space of a week.

So I've used the CC and deferred it to next pay day.

They are brilliant tools to have available to you, but they must never be used as a regular source of funding for your day to day life.
 
robgmun said:
They should quite rightly be very careful with them. Misuse them and it can royally screw up your life

One thing secondary school desperately need is lessons in personal finance.
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I was making reference to the perfectly intelligent people who are scared in to blindness, thinking that they are only for people who can't afford to live within their means and are nothing but trouble. Like I said, I blame the parents :p
 
The banks certainly seem to swing one way or the other when it comes to credit limits. I had one card with a limit of £250 up until recently, which is fine as it was just to build up a credit rating.

What I find surprising is that between me and my gf (who are students with nothing but student loan as income, no jobs) now have available between us a credit limit more than our student loans added together. I'm not bothered by having such high credit limits, but no wonder the financially irresponsible find it easy to end up in a mess when the bank are offering up credit limits >100% income.
 
@OP

the interest rate is really bad on that card - the fact you're considering spending your last £50 of the available limit suggests you're struggling regardless - the question of whether or not you can spend that extra £50 is rather insignificant compared to the question of how do you expect to pay off the balance at that interest rate given that you're seemingly strapped for cash.

I'd seriously look into getting some advice... maybe you can shift the balance some how to a lower rate (simple if you've got a job - balance transfer to another card for a small fee and use the interest free period to pay it off).... I'm not sure how easy it would be to get any other card since you're unemployed so you really ought to speak to CAB or one of the debt charities out there (do not speak to any commercial organisation offering similar services - just stick to CAB or not for profit orgs) - if its unmanageable for you then you might need to look at an IVA.... either way that interest rate is the biggest issue you're going to face and getting away from that somehow and paying down the debt is something you ought to do ASAP.
 
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