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FOOL SCHOOL
The world of credit cards has changed dramatically over the last few years. Not that long ago, interest rates of 20% plus were the norm. However, there has been an influx of new entrants recently offering far better rates and discounted rates on balance transfers. In addition the government is currently in the middle of a consultation process concerning the introduction of CAT standards for credit cards. So now is a good time to take at a look at your existing cards as there may be substantial savings to be made.
About half the population has a credit card having, on average, two cards each. Approximately half of those who do have a credit card claim to pay them off in full each month. However, around a third of us carry debt of more than £250 on our 'flexible friends'. Make no mistake a credit card can be a dangerous weapon in the hands of those who don't know how to use them properly.
Know Your Cards
Do you know your debit card from your credit card? Many people don't. Here's the low down on the differences between the various types of plastic.
Debit card - automatically takes the money from your bank account after a few days. It's basically an electronic cheque.
Credit card - you get sent a monthly statement and decide on how much to pay off each month.
Charge card - you get sent a monthly statement but have to pay it off in full each month. American Express is the most famous example.
Charity card - similar to a credit card but a small proportion of every pound you spend is donated to charity.
Store card - the instrument of the devil. Frighteningly easy to get but with toe-curling rates of interest. Some still charge up to 30% a year. Avoid at all costs, unless you are certain that you will pay them off in full each month.