Computer Shopper 121

home *** CD-ROM | disk | FTP | other *** search

/ Computer Shopper 121 / Computer Shopper 121 / Computer Shopper 121.iso / HomeBus / money / Money98 / MONEY98.1 / 002006.HT$ < prev next >

Wrap

Text File | 1997-10-10 | 15.5 KB | 124 lines

<!DOCTYPE HTML PUBLIC "-//IETF//DTD HTML//EN"> <html> <head> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> <meta name="GENERATOR" content="Microsoft FrontPage 2.0"> <title>Untitled</title> <link rel="STYLESHEET" href="style1.css" type="text/css"> <base target="_top">  </head> <body bgcolor="#FFFFFF" topmargin="0" leftmargin="0"> <table border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td align="right" valign="top" width="174"><a name="top"> </a> </td> <td align="right" valign="top"> </td> </tr>  <tr> <td align="right" valign="top" width="174"> </td> <td valign="top"><a><img src="mi_logo.GIF" width="200" height="36"></a> </td> </tr> <tr> <td align="right" valign="top" colspan="2"> </td> </tr>  <tr> <td align="center" valign="top" width="174"><img src="002006.jpg"><table border="0" cellpadding="0" cellspacing="0" width="138"> <tr> <td align="right" valign="top" width="138">C O N T E N T _______________ <A HREF=#1 target=_self>How Do Plastic Cards Differ? </A> <A HREF=#2 target=_self>How Much Do Cards Cost? </A> <A HREF=#3 target=_self>Using Plastic Overseas </A> <A HREF=#4 target=_self>Additional Card-Holders </A> <A HREF=#5 target=_self>Affinity Cards </A> <A HREF=#6 target=_self>The Golden Rules </A> <A HREF=#7 target=_self>Cash Advances </A>Expert A s s i s t a n t <SCRIPT LANGUAGE=VBScript></SCRIPT> </td> </tr> </table> </td>  <td valign="top">Credit and Charge Cards by <A HREF="money:navigate/guide/guide/010005.html">Annette Brown</A>, personal finance journalist, contributor to the Saturday Telegraph and Money Mail, and personal finance editor of Saga magazine. In the United Kingdom, 30 major banks and financial institutions issue around 1,300 different credit, debit and charge cards. Each has slightly different rules so you cannot compare like with like. Be aware of hidden pitfalls in seemingly attractive offers; a low-interest honeymoon might be followed by years of higher than average interest rates. Shop around; don't limit yourself to the card offered by your own bank or building society. You will be given a credit limit according to a rating calculated by the card company. (See <A HREF="money:navigate/guide/guide/003002.html">Understanding Credit Ratings</A> and <A HREF="money:navigate/guide/guide/003003.html">What To Do if the Credit Rating Is Wrong</A>.) <a name=1>How Do Plastic Cards Differ?</a> A credit card allows you to buy goods and services, and pay off the bill either all at once, usually interest-free, or by instalments. A minimum must be cleared each month; interest is added to the outstanding balance. Store cards are a form of credit card. With a charge card, you pay an annual fee varying from ú25 to over ú100. It allows you to buy goods and services, with no pre-set spending limit. The full bill must be settled each month or you are charged a daily penalty. A debit card is linked to your bank account. When you buy goods and services with the card, the amount is taken directly from your account, through the wonders of Switch and Visa Delta's electronic swiping. A cash-back facility allows you to draw up to ú50 from your bank account when you use your debit card at many retailers. Your bank balance is debited within a day or two and the transaction appears on your regular bank statements.</td></tr><tr><td align=center valign=top><TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=138 BORDER=0><TR VALIGN=TOP><TD valign=top align=right WIDTH=138><A HREF=money:navigate/guide/guide/222001/9>G L O S S A R Y ______________ ATM</A></TD></TR></TABLE></td><td align=left valign=top> You can withdraw cash at automated teller machines (ATMs) with a credit or debit card. This usually costs an extra 1.5 per cent if you use your credit card. If you settle your credit card bill in full by the due date, you pay no interest, except on cash advances and foreign currency. If you don't settle in full, interest will normally be charged from the day the debt was incurred on any balance outstanding. Allow plenty of time for your payment to reach your account. Card companies make money on what you owe, so they add interest if you are only one day late! </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A><A HREF=money:navigate/guide/guide/222001/8>G L O S S A R Y ______________ APR</A></td></tr></table></td><td align=left valign=top><a name=2>How Much Do Cards Cost?</a> Issuers charge for cards in two main ways: <UL> <LI>by annual fee, sometimes waived for the first 6 or 12 months, or if card-holders spend a minimum amount (often ú2,000) a year; </LI> <LI>no annual fee but a slightly higher interest rate on the outstanding balance often with a shorter settlement period or no free credit period at all. Many issuers charge split-level interest, dropping slightly as the debt rises.</LI></UL> Broadly, you can work out the cost of interest on your outstanding balance by looking at the card issuer's annual percentage rate (APR) which is the cost of credit plus charges. In simple terms, a monthly interest rate of 1.5 per cent compounds to an APR of 19.5 per cent over 12 months. An annual fee increases the APR (see further <A HREF="money:navigate/guide/guide/002003.html">What is APR?</A>). Most charge cards demand a higher annual fee for their "Gold" cards, but allow you a slightly lower interest rate and give extra benefits. You may need to show proof of income or the ability to settle a large annual spend to qualify for a Gold card. Some issuers offer low introductory rates, rebates for switching cards, loyalty and reward schemes if you spend a certain amount. But you have to work out the system that suits you best; there is more than the APR to consider. If you know you will pay off your outstanding balance each month, opt for a fee-free card, but beware very short interest-free periods. If you think you won't clear the balance each month, choose a card with a low interest rate. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=3>Using Plastic Overseas</a> Credit, debit and charge cards save you carrying cash around. But they have drawbacks. Cards are so widely used in the United States that many hotels and car hire firms insist on them rather than risk having cash on their premises. Beware: they can add charges you have not agreed or incurred (mini-bar bills, petrol etc.), but that you are not aware of until your statement arrives on your doormat at home a month later. You then have to resolve the dispute by long distance. Alternatively, they may "block" an amount from your card to cover future commitments, leaving you with little or no credit for the rest of your trip. Take at least two cards for the United States and the Far East, and clear your balance before you go, so you travel with maximum credit. The other peril overseas is fraud. Con-men may either duplicate your card in the few seconds it is out of your sight in a restaurant or shop, or they add an extra nought or two in the total column of the slip you sign, so you pay 10 or 100 times too much. Always keep your cards with you. Check the amount is correct before you sign. Rule through any spaces so that figures cannot be added later. Don't allow double swiping, and tear up carbons and any spoiled slips before they fall into the wrong hands. There are hidden costs in using your card abroad. You are charged for the conversion into sterling, plus a card scheme charge, plus a card issuer charge. But currency exchange costs money whichever method you use, and plastic is at least safe and convenient. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=4>Additional Card-Holders</a> Card issuers will allow an account-holder to add a second person to their account. If you want to do this, remember that you are legally liable for the entire debt. This is not a joint account. A second card will be issued to the second person in their name. But your credit limit will not increase and you may even want to reduce the credit limit once someone else is spending on your card! In the case of separation or divorce, cancel the arrangement immediately. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=5>Affinity Cards</a> You can use your card to support a particular interest or organisation. A small proportion of the total you spend will be given by the card issuer to the organisation's funds each year. Welfare groups, animal charities, colleges, armed services, medical research, sports clubs and dozens of other causes benefit from this arrangement. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A><A HREF=money:navigate/guide/guide/222001/111>G L O S S A R Y ______________ PIN</A></td></tr></table></td><td align=left valign=top><a name=6>The Golden Rules </a> <LI>Keep credit and charge cards to a minimum and resist the temptation to run up large bills. They are an easy way of short-term borrowing. But the day of reckoning will come, with interest! </LI> <LI>Retain all your receipts and cash withdrawal slips. Check them against your monthly statement, especially if you use your cards overseas or have direct debits taken from your card account. </LI> <LI>Memorise your PIN; don't write it down or leave it with your card or give it to anyone else. </LI> <LI>Report a lost or stolen card immediately to your card issuer by phone and letter. This should limit your liability to ú50. They will issue you a new card. Issuers sell insurance to cover card loss.</LI></UL> </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=7>Cash Advances</a> Most issuers charge a cash handling fee of around 1.5 per cent with a minimum charge of between ú1 and ú2.50. Check how your card issuer charges interest on cash advances. No interest is charged when you pay the balance in full. When it isn't, interest is charged: <UL> <LI>from the date of the statement; or </LI> <LI>from the date the transaction reaches your account; or </LI> <LI>from the date you take out the cash. </LI></UL> Alternatively, interest may be charged from the date you take out the cash whether you clear your balance in full or not, but there is usually no cash handling charge as a result. There are over 33 million credit cards and 33 million debit cards in circulation in the United Kingdom, with an annual spend of around ú50 billion on credit cards, excluding cash advances, and almost ú40 billion on debit cards, plus billions more on charge cards. Yet this represents only 3 per cent of borrowing in the United Kingdom, far less than mortgages (85 per cent) and other loans (12 per cent). N E X T T O P I C <A HREF=money:navigate/guide/guide/002007>Consumer Credit </A>To access further financial articles, have a look at <Spann Class=MSNLink>MoneyManager on MSN! <a href=http://MoneyManager.uk.msn.com><img src=msn_logo.gif border=0 align=top></a> Copyright 1997 Microsoft Corp.</td> </tr> </table> </td> </tr> </table> </body> </html>