One piece of consumer credit that you are overwhelmingly likely to have in your life is a credit card. But are you managing it properly, and are you getting the best from any credit cards you have?
I’ve put together a few thoughts on how best to approach using a credit card – as well as a little bit about what to do when things go wrong.
Do you need a credit card?
The short answer to this is ‘probably’. There are plenty of occasions when you’ll find a credit card extremely useful. If you’re staying at a hotel or renting a car, for instance, they often ‘block out’ part of your credit card as a virtual deposit in case of damage or non-payment. Other useful aspects of a credit card include extra protection from fraud or refund policies, and sometimes freebie extras such as cashback rewards.
What are the downsides?
You need to be disciplined. If you don’t meet repayments interest can start to quickly add up, especially on higher-rate cards. Ideally, you need to make sure you pay off the entire balance every month.
Credit checks
You’ll undergo a credit assessment when you apply for a card. What’s more, any late-payment charges will affect your credit rating, which will make it harder for you to get credit in other ways – including a mortgage.
Never use a credit card to take out cash.
You’ll almost always be charged a fee to withdraw cash via an ATM using your credit card – as much as £5 a time – as well as interest on the money you withdraw.
Tempting introductory teaser interest rates
Interest rates on some cards can seem low at first – but check the small print and you could find that the interest rate goes up dramatically after a certain period.
Credit card protection
If you use your credit card to buy goods or services worth more than £100 and up to £30,000, you’re covered by ‘section 75’ of the Consumer Credit Act. This could be anything from a weekend break in a hotel to a new car.
What it means is that if there’s an issue with the items you’ve purchased, the credit card company has equal responsibility with the seller. This is particularly useful if the company you’ve bought something from goes bust, as you might be able to claim a refund form your credit card provider.
If you’ve a problem with goods or services, it’s best to try and resolve this with the retailer in the first instance – and you can do this by raising a case free via resolver.co.uk
Reclaiming unfair credit card charges
You might be able to claim charges that you consider to be unfair, even if they’re because of missed or late payments – especially if you’re dealing with lots of debt. According to the Governments’ Money Advice Service:
“The Financial Conduct Authority (FCA) has now taken over from the OFT as regulator for the consumer credit industry. However, if you are in financial hardship and have incurred charges – or were previously in debt and incurred regular charges at the higher rates – you may still be able to reclaim some or even all of them.”
By James Walker, www.resolver.co.uk