CREDIT CARDS

GUIDE

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Credit cards have become part of everyday life since their introduction to the UK some forty years ago.
When Barclaycard was launched in 1966, it was the UK's only credit card. Actually, initially it operated like a charge card so the bill had to be paid off in full every month and the maximum credit limit was a mere £100. How times have changed. Competition among credit card issuers is now fierce and this has created an intensely fragmented market, with cards to suit all classes, from the super-rich to those with bad credit histories.
Pretty much anyone can get a credit card these days - there are more than 1,500 to choose from - and there's no doubt that they make life more convenient. Being able to borrow money, interest-free, on a temporary basis, is, frankly, a no-brainer especially when your 'real' cash can be earning interest elsewhere in the meantime.
For most people, however, it makes sense to pay off the bill in full every month but for those who can't manage it, there are now plenty of deals around that offer interest-free periods lasting much longer than the usual 50 or 60 days. Some 0% credit card deals can last for more than a year and you can even transfer balances from other cards so that those debts are interest-free too.
Nevertheless, the best way to use your cards is to treat them as a convenience, try not to borrow too much on them and ensure you repay your bill in full every month.

WHY USE A CREDIT CARD

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Let's face it. Credit cards are a jolly convenient way of handling cash flow and there's the added bonus that you can get up to 59 days of borrowing interest-free. But there are other benefits too.
Buy anything for between £100 and £30,000 on a credit card and you have valuable rights under Section 75 of the Consumer Credit Act. It means that when you buy something using your credit card, your contract is with both the trader and the card issuer. They have equal liability for anything that goes wrong so you can take action against either of them to get compensation. The legislation is restricted to goods sold for more than £100 and less than £30,000 but it's tremendously useful in situations where, for example, the goods are damaged or don't turn up, or the company goes bust.
Section 75 covers everyone using a credit card but you won't be surprised to know that card issuers don't exactly fall over themselves to let you know about this extra protection. In fact, you might even have to fight quite hard to enforce your rights with some companies but stick to your guns if you know you're in the right.
Interestingly, the legislation applies even if you only make a part-purchase, for example, by using your credit card to pay a deposit on something and you are also covered for items bought abroad and over the Internet. Note that debit and charge cards are not covered by the legislation so, when you buy something for more than £100, make sure you use your credit card to do it. The extra protection makes it worthwhile as long as you pay your card off in full at the end of the month.
Some credit cards also offer purchase protection for free. If items bought with your card are lost, damaged or stolen within a specified period (usually up to 100 days from the purchase date), you can make a claim against this cover. It's useful for fragile or high-value goods but check the small print for exclusions
Other free benefits sometimes offered by card companies include price protection where if you buy an item and then find it cheaper in a later sale, they'll allow you to claim back the difference. The usual time limit is 60 days from the purchase date. Claims between £10 and £1,000 are usually valid, often subject to a small excess. You may also get free extended warranties, which extend manufacturer guarantees, usually for an extra year, or, alternatively, certain types of free travel insurance.

HOW TO APPLY FOR

A CREDIT CARD

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When you apply for a credit card, the two main sources of information that lenders use when deciding whether to grant you credit are the personal details you supply on your application form and the information held on you by the credit reference agencies.
It, therefore, follows that the information supplied by you and the agencies needs to be accurate. Don't be tempted to lie on your application form about other cards or loans that you have as they'll just show up on your credit report and you'll be found out! Exaggerating your income levels is also unwise - your aim is to use the credit card sensibly and not to land yourself with debt problems that you eventually can't cope with.
It's particularly important to be aware that when you apply for a credit card it can take longer than you think to process. So watch out if you are trying to time a balance transfer from one card to another where an introductory period for an interest-free credit card is about to expire. Credit card companies usually aim to sort things out in ten to 14 days but remember that forms need to be signed, the card will arrive separately in the post from your Personal Identification Number (PIN) and then you'll need to activate the new card.