Can you change credit cards, even if you have big debts?
Yes. By moving your credit card debts to a lower charging card you could save yourself a lot of money.
Many UK credit cards now offer 0% introductory rates for balance
transfers.
Can I switch card when I come to the
end of the introductory period?
Yes. Some people with outstanding debts on their
credit card save a considerable amount of money simply by moving their
balance around from one 0% rate to the next.
Could this damage my credit rating?
Card issuers can't tell how many cards you have had in
the previous year or two - or how many you hold. But they can see how
many other companies have run credit searches on you.
If you do switch regularly, it should not have a
negative impact on your credit rating, according to credit reference agency
Experian.
Jill Stevens of Experian said: "If you start at
one end of Oxford Street and apply for credit at every shop, the lender
can see the record and will think it is a bit peculiar - it may look
like you are committing fraud.
"But we only keep search records for a year and
lenders are only going to think something is odd if the behaviour is
abnormal. To get a new credit card now and again has become common
behaviour."
The difficulty could come if you forget that the zero per cent period
has ended, or are too busy to switch your cards again in six months'
time.
Most credit card companies are extremely reluctant to
discuss how they "credit score" potential customers. Those
prepared to do so say that the number of credit searches should not by
itself affect lending decisions. But, coupled with other risk factors -
such as debt problems, or frequent address changes - searches could lead
to your being refused credit.
Are any other charges levied on credit cards?
There are a number of charges that can bump up the cost
of borrowing significantly. Most credit card charge for late
or missed payments, over spending your credit limit, or even requesting
a new statement.
These charges can be hefty and easily outweigh lower
interest charges if you incur them on a regular basis.
As a general rule, drawing out cash using your credit card represents
very poor value for money with charges of around 2% per month.
Many of us like credit cards for their ease and flexibility when
travelling overseas. But credit cards are generally quite an expensive
way to pay in these circumstances with charges and catches similar to
those that apply to withdrawing cash. If you're planning to use your
credit card when abroad it's advisable to check out the small print, and
your alternatives, in advance.
I clear my balance every month so the interest rate
is irrelevant. What type of card should I go for?
If you intend to clear the credit card balance each month go for a
card that offers loyalty incentives. These range from
Air Miles and cashback schemes to reward schemes where points can be
redeemed against anything from shopping bills, utility bills, new cars
and holidays. Moneyback schemes are the most straightforward as you know
exactly what you're getting and you can use the cash as you wish.
However in many cases the benefits are often fairly marginal in
comparison to what you have to spend in order to earn them.
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