Credit Cards

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Tragic Magic
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PostCredit Cards
by Tragic Magic » Tue Sep 11, 2012 5:44 pm

Hi there,

Basically, I know nothing about credit cards and need advice. My Mrs and I are currently saving with the plan to apply for a mortgage some time next year. Now we've both been brought up by our parents that credit cards are evil and only for people who spend money they don't have so we've never got them or looked into it. But I'm under the impression it'll help us with getting a mortgage to have a credit card with a good credit rating. Please can someone advise? I know I could ask my bank but I prefer to get the opinions of the trusted, intelligent folk on GR rather than a suit with a fake smile.

My main gripe is paying interest. I know you can pay for things up front with no interest on credit cards but I don't know how it works. Also have no idea what company to apply for a card with or if there are any bad companies or anything.

So please, could someone offer advise or just summarise the details for me so I have at least some idea of what to go on?

Thanks

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PostRe: Credit Cards
by Errkal » Tue Sep 11, 2012 6:24 pm

To boost your credit rating you need to use credit then pay it back.

So best thing to do is get a card (get one with 0% on purchases for a set time, that way anything you do buy wont gain any interest in that time) and then pay it all back.

Best thing to do is get a card, then do all your food shopping or something like that on it and at the end of the month pay off the bill in full, you will have used credit and paid it back which all works in your favour when building a credit rating.

As long as you pay back when you spend or at least pay a chunk of the amount off each month and the balance is decreasing you rating will improve.

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PostRe: Credit Cards
by Slartibartfast » Tue Sep 11, 2012 6:41 pm

If you have a phone bill or direct debits you should have some credit score.

I'm sure banks are used to dealing with young people who don't have a large credit score. Although they might just be used to refusing them mortgages.

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PostRe: Credit Cards
by 7256930752 » Tue Sep 11, 2012 6:49 pm

How well do you budget Trag? If say you know you're outgoings are £800 a month, stick all your direct debits on a credit card and make a payment of £800 from your bank to the credit card company.

Or you, you know, just buy loads of stuff you want and pay back the minimum each month :shifty:

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PostRe: Credit Cards
by Lagamorph » Tue Sep 11, 2012 6:51 pm

Hime wrote:Or you, you know, just buy loads of stuff you want and pay back the minimum each month :shifty:

That wont really help and will only make things cost more because of the interest.

If you get a credit card purely for earning a higher credit score, then do things like your food shopping or buying petrol on it, then pay it off in full as soon as the statement comes through. If you pay it off in full then there'll be no interest to pay even after the interest free period.

Oh, and never ever ever draw cash on a credit card. Ever.

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PostRe: Credit Cards
by darksideby182 » Tue Sep 11, 2012 7:21 pm

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PostRe: Credit Cards
by kommissarboris » Tue Sep 11, 2012 8:00 pm

Lagamorph is right about cash and credit cards, unless you get a card that has a facility that actively allows for cash withdrawals, don't do it. Simply put, you're converting credit to cash, charged a fee, usually 3% (the conversion fee) and then butt strawberry floated into oblivion by interest that dances usually around 25% - 40%, charged at a daily rate and usually top tiered (last paid off).

If you have no Credit history don't go and apply with the mainstream banks, they'll say no, and this will show up on your file as a failed attempt at gaining credit and will go further against you.

You're going going to have to find a , "credit builder" credit card, they'll have rediculious APR, 38% +/- 5%, but take the advice already given, use it for small frequent transactions, pay it off so you don't get slapped with that APR, and do this over a period of 6 - 12 months, they are high risk credit providers, but if you've got no credit rating, or a shitty rating it will be your only hope.

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PostRe: Credit Cards
by Oblomov Boblomov » Tue Sep 11, 2012 11:44 pm

I've just set off on the road to building my credit rating by getting my first credit card with Nationwide. I've been told by a friend at work who has met with a financial advisor to pay off double the minimum amount each month, as apparently this will give me a better credit rating than if I pay it off in full. I'm going to do this for as long as I have 0% and then clear the balance just before the interest kicks in.

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PostRe: Credit Cards
by Tragic Magic » Wed Sep 12, 2012 7:28 am

Slartibartfast wrote:If you have a phone bill or direct debits you should have some credit score.

I'm sure banks are used to dealing with young people who don't have a large credit score. Although they might just be used to refusing them mortgages.


Yeah, we live together now so I have stuff like that.

Guess I should get a card then. We're both really good with our money and save plenty but it all just sounds so scary. So you have to spend a minimum on the card each month? And so long as I paid it all off as soon as a statement came through, there'd be no interest? Should I go with any company in particular?

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PostRe: Credit Cards
by Igor » Wed Sep 12, 2012 7:30 am

MSE has a list of the top 6 or so cards with the longest 0% interest periods. For example, get a Tesco card and you pay 0% on all purchases for 16 months.

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PostRe: Credit Cards
by Tragic Magic » Wed Sep 12, 2012 7:38 am

Is "minimum credit limit" how much you have to at least spend in a month?

Just did a search on a websire and went to the "credit building" cards. First one I clicked is this:
http://www.capitalone.co.uk/creditcards/classic-extra-credit-card.jsf
Thanks for all the advice so far but I still feel out of my depth. Is that a good card or bad or what?
Just wanna get this sorted.

Looking here http://www.moneysupermarket.com/credit-cards/credit-builder/. No idea what makes a card a better option to the next.

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PostRe: Credit Cards
by Lagamorph » Wed Sep 12, 2012 8:15 am

You don't have to spend a minimum each month, you can spend nothing on it at all. Most basic credit cards have no fees and if the balance on the card is 0 then you'll pay nothing at all since there won't be any interest.
Minimum credit limit will be the minimum limit that the provider will give you when you get the card. The maximum limit is usually determined by your current credit score.

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Tragic Magic
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PostRe: Credit Cards
by Tragic Magic » Wed Sep 12, 2012 5:40 pm

Lagamorph wrote:You don't have to spend a minimum each month, you can spend nothing on it at all. Most basic credit cards have no fees and if the balance on the card is 0 then you'll pay nothing at all since there won't be any interest.
Minimum credit limit will be the minimum limit that the provider will give you when you get the card. The maximum limit is usually determined by your current credit score.


Oh right, so if you have a £200 minimum limit, that means you can't spend more than £200 on the card per month? Starting to make sense now. So I should go for a "credit builder" card for sure? Is there much difference between all the brands or are they all practically the same deal?

Just spoke to the Mrs about it all and feeling much better. Just need to know which one to go for. Thanks for all the advice so far.

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PostRe: Credit Cards
by kommissarboris » Wed Sep 12, 2012 6:07 pm

Tragic Magic wrote:
Lagamorph wrote:You don't have to spend a minimum each month, you can spend nothing on it at all. Most basic credit cards have no fees and if the balance on the card is 0 then you'll pay nothing at all since there won't be any interest.
Minimum credit limit will be the minimum limit that the provider will give you when you get the card. The maximum limit is usually determined by your current credit score.


Oh right, so if you have a £200 minimum limit, that means you can't spend more than £200 on the card per month? Starting to make sense now. So I should go for a "credit builder" card for sure? Is there much difference between all the brands or are they all practically the same deal?


You should spend on it, otherwise you'll just have a credit amount sitting there doing nothing, you're not showing you can manage it.

If you have no credit score, or a low one, you've got a better chance of getting a high risk card than a low risk one, ie the high the APR the better chance you'll have at getting it, remember if you apply and fail that will go against your next application.

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PostRe: Credit Cards
by Oblomov Boblomov » Wed Sep 12, 2012 6:10 pm

I am spending a lot more money ever since I got this credit card. I think the 0% lasts for 12 months... I am going to have one hell of a bill to pay off this time next year :lol:.

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PostRe: Credit Cards
by Tragic Magic » Wed Sep 12, 2012 6:37 pm

Oblomov Boblomov wrote:I am spending a lot more money ever since I got this credit card. I think the 0% lasts for 12 months... I am going to have one hell of a bill to pay off this time next year :lol:.


I think having a credit card would help me to save even more money because of that. Knowing I'll pay it all off at the end of the month.

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PostRe: Credit Cards
by Chickenwings147 » Wed Sep 12, 2012 7:24 pm

How about a cashback credit card?

Downsides of these are they have a higher APR but if, as you say, you pay it off every month it maybe worth a look.
The missus & I get about £4-6 quid back every month

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PostRe: Credit Cards
by Lagamorph » Wed Sep 12, 2012 7:25 pm

I have a Virgin Atlantic credit card that actually gives you two cards on the one account, one Visa and one American Express. Get 1 air mile for every £1 spent on the Amex and 1 air mile for every £2 spent on the Visa. I just buy my food and petrol using it and pay it off, and it builds up some miles.

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PostRe: Credit Cards
by Mafro » Wed Sep 12, 2012 10:40 pm

Errkal wrote:To boost your credit rating you need to use credit then pay it back.

So best thing to do is get a card (get one with 0% on purchases for a set time, that way anything you do buy wont gain any interest in that time) and then pay it all back.

Best thing to do is get a card, then do all your food shopping or something like that on it and at the end of the month pay off the bill in full, you will have used credit and paid it back which all works in your favour when building a credit rating.

As long as you pay back when you spend or at least pay a chunk of the amount off each month and the balance is decreasing you rating will improve.

This is pretty much exactly what I do with my credit card. It's a great thing to have, plus you can get some good additional perks like phone insurance and stuff.

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PostRe: Credit Cards
by satriales » Wed Sep 12, 2012 11:24 pm

I got a Tesco credit card a few months back as it gave £1000 interest free for 12 months or so. I used it to buy loads of stuff when I had just started my new job and hadn't been paid yet.

Now I have it set to take £50 from my current account every month and it should be paid off by the end of the year with no charges or interest.

If you're really savvy then you can get multiple interest free cards and put the money in savings so you are earning interest on money you are borrowing for free. But at 3.0% interest £1000 will only earn £30 in a year, so it's probably not worth the hassle unless you can get a better interest rate or if you can borrow more than that.

One thing to remember is that the credit cards do usually require you to pay back a minimum each month, which is about £20 or 5% of what you borrowed. You can set it up to take this automatically each month.


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