Use our UK Finance guide and learn by experience. We outline pitfalls so that you don't have to learn the hard way, as many of us often do.
Credit Cards
Credit Card Promotions, what to look out for
Credit card companies thrive upon the generally uneducated public. When it comes to clauses and exceptions on credit card contracts, so many people are caught proverbially with their pants down when they receive their credit card bills and are shocked to see the unexpected amount.
They claim not to charge you any interest. However if you for whatever reason don't pay the full amount due, then you'll be charged and if there's an outstanding amount on your card when the promotion ends, you'll more than likely be hit with a high interest.
They claim for no annual fees. True, but they don't mention the monthly fees for late payments, going over your balance, transfers etc.
They claim a fixed rate, but they'll often not indicate for how long this amount will be fixed for and after a few months, they'll change it without any notice to you
They'll say no rates, but that is greatly dependant on what your credit score is. If you've had some bad credit in the past, you can rest assured that you'll be charged rates.
Clearly, many claims are made, but there's always two sides to a story and there's always a catch.
Granted, not every credit card company is like this and you'll often find a good deal. However it pays to be mindful of such claims and traps so that you don't get caught. Fine print is what many companies use to catch their potential clients. They don't expect people to read the expanse of paperwork that you'll be given to sign. For example you'll be enticed with a claim for a 0% interest credit card. What they won't tell you up front though, is that instead of your regular payments that you'd expect to pay at the end of the promotional period, you'll be expected to pay the full purchase price.
Another snag that catches many are short periods of no interest that lure you into getting a credit card. However at the end of promotional period, you'll be shocked to see that you're now being charged the interest that you never paid for those few months of the promotion.
And the 'no annual fees' catchline? Well somehow they manage to twist their words to not charge you an annual fee, but charge you a membership. A clever play on words that snags many people.
The biggest catch of most credit card contracts, is the fine print section that says, 'subject to change without notice.' Basically then, the credit card company is able to change their minds about any of their policies and after signing that contract, you really have no say in the matter.
Great! So you got a fixed rate credit card. But did they take the time to mention that that particular fixed rate is probably the highest rate allowed in your country? So default on a payment or go over your balance and you'll be whacked with a sizeable interest amount.
To get you into their bank and in front of a terrific salesman, they'll often tease you with ridiculously low interest rates. But once you're there, you're told that such rates will only apply if you have a squeaky clean credit record, minimal current debt and a great salary. Doesn't really apply to many people now does it? No, the majority of people won't fall into that bracket. However this is what you'll find out only after you've signed the contract. “Sorry, those rates didn't apply, but these rates do…” They're pretty much relying on the hopes that most people will accept their bad luck and simply use their new card and pay the required fees and interest.
So the all important question, how do you stay clear of such pitfalls?
Firstly, as tedious as it might seem, read all the fine print. If you aren't sure on something, don't just skip over it, ask someone! Call a knowledgeable friend or a financial consultant for guidance. Don't be surprised if even the clever financial consultants have a few queries on that contract.
Don't apply or sign any credit card contracts until you know exactly what your particular rate will be. This will more than likely make the process a lot longer because they'll have to run a number of processes to find your applicable credit rate. But the time spent in organising this will give you that peace of mind in knowing what you're going to be paying. If that particular financial institution can't guarantee their rate, or tell you up front what your rate will be, then rather take a step back and source another credit card company who can.
Make sure to aim to make all payments 7 days before it becomes due. Late payment fees are always high and its pointless to waste your money paying off fees. In the days of internet banking, paying your account over the net is the wisest and easiest way to keep on track of your payments.
Take a few minutes each month and verify on your latest statement that the interest rate you're paying is the rate that you signed up for. If its being increase, educate yourself as to why. Don't let your credit card company think that you're going to sit back and pay whatever they demand. Make sure each penny is justified. Perhaps you missed a payment, or made one late and your rates have been increased. Most companies, after a few months will reduce the rate back to its normal amount. However they won't do that out of the goodness of their hearts. They'll only do that if you push for it. So keep in tune with your monthly statements and ensure that you're not paying more than what you should be.
Fortune favours the well prepared. Make sure then, that you set aside the time to verify all the necessary details before applying for your credit card.
