Money Management & Credit Cards Explained

Credit CardMany people choose to pay for things with a credit card. With hundreds of different credit cards available in the UK, there are plenty to choose from. Each credit card can have advantages and disadvantages depending on how you want to use them, but essentially they are a form of short-term loan.

You can use a credit card wisely and actually save money, with many credit card holders enjoying either low or zero interest rates or at least never having to pay interest or charges because they use them in the right way.
How Credit Cards Work

Credit cards work by electronic payment, either in person at a shop or retail outlet, or over the telephone or Internet. Because the card works by electronic payment, they can be very useful for Internet shopping. They also offer good security functions and are considered one of the most reliable and safe means to pay for things. Many different types of organizations offer credit cards, from banks to supermarkets.

Credit Card Interest

When you pay for things on a credit card, the balance of the debt will have interest – measured as an Annual Percentage Rate or APR – charged to it after a certain period of time, usually up 59 days from the date of purchase.

This means that if you can repay the debt in full before interest is charged, then you will essentially have got a short-term loan for free. Not everyone can take advantage of this all of the time, and sometimes when a debt gets to a certain level the interest added can become a financial burden.

This is where balance transfer options can help credit card holders concerned about debt and getting value for money.

Balance Transfers

Applying for a balance transfer is essentially switching the old debt to a new credit card. The new credit card company will pay off the old credit card debt for you, but then add it to the new credit card. This is popular with many credit card holders because the new credit card can often have a significantly lower interest rate, or even a zero rate of interest for a period of time.
The introductory low or zero rate of interest can last up to 6 months, or if you shop around for a good deal, even longer. This gives the credit card holder some breathing space to pay off the debt from their previous credit card. Without huge amounts of interest being added every month, it can make the process a lot easier and much less stressful.

Applying For A Balance Transfer Credit Card

When you apply for a credit card, it is important to consider a range of factors. The new card should have a zero rate or good introductory rate of interest that should be less than the rate you are presently paying.

Read the small print, and make sure you know what the standard interest rate will be after the introductory offer. Try and find a reasonable balance between a low or zero interest rates, and what you could be paying in the long term.