What lenders don’t tell you about introductory offers

By Jon Robson

The UK credit card market is ludicrously competitive – sometimes it seems that some of the biggest lenders would even be prepared to offer you their own grandmothers just to get you to sign up. By enticing you in with incredible credit card introductory offers they hope to reap the rewards from your interest payments. However, when used wisely, credit cards – and in particular introductory offers like 0% balance transfers and 0% interest on purchases, as well as retail and travel discounts, could effectively mean that, not only can shop for free, sometimes you can even actively reduce your current spending.

While credit agencies may advise that credit card lending is the most expensive form of debt, crafty consumers who manage their spending on credit cards with care and restraint can use great credit card introductory deals to their advantage. Some even use a technique known as “credit card offsetting” where you use your credit card to buy all the goods you would normally purchase on your debit card and then place the money you have saved in a high interest bank account. However you plan to use your credit card, there are a number of tips and pitfalls to be aware of to get the most for your money.

Firstly, beware of 0% balance transfers! Banks and other lenders have got wise to “credit card tarts” that continually swap between balance transfer offers; some lenders will charge a transfer fee. Others may even refuse your card application if you have taken advantage of their 0% credit card introductory offer in the past. Swapping cards too frequently to take advantage of 0% on balance transfers could even affect your credit rating as lenders are able to assess the number of credit searches against your name.

Many credit card introductory offers also include 0% on any purchases for a limited duration. Barclaycard Premium for example offers 3 months at 0% while others like MBNA Platinum fix the period on a specific date (in their case 0% on purchases until March 2008). However, it’s worth finding out if the card you’re interested in offers 0% on cash back. If not then you need to be aware that while it’s convenient, it’s not the same as using a cash point – every time you get cash back on your credit card you are borrowing money and will therefore be liable for interest on the cash. If your card doesn’t offer 0% on cash back then it makes far more sense to use your debit card to withdraw cash.

Credit cards can be an extension of your lifestyle. While 0% balance transfers and 0% on purchases are the main incentives for many lenders there are also a huge variety of other credit card introductory offers, often specific to a particular card. Some are designed to appeal to your lifestyle choices – Barclaycard OnePulse, for example, has tied in with the Oyster Travelcard so you only need one card for travel and shopping while the MBNA WWF card makes a contribution to the World Wildlife Fund for every card. Other cards appeal more directly to your pocket offering discounts and special offers at specific retailers – Virigin Credit Card offers discounts at the Virgin Megastore & Virgin Holidays while Egg offers up to 10% at selected retailers. If you already spend a great deal of money at a specific retailer included in a credit card introductory offer then it gives you the opportunity to make potential savings.

Finally, the bottom line for most people should be the APR – that’s the amount of interest you have to pay on the money you borrow. Rates are currently around 15% but some cards such as the Capital One Platinum card are offering rates as low as 9.9%. Whichever card you use the biggest money saving advice is: pay off your outstanding balance every month. By following this simple strategy you’ll take advantage of the juicy incentives offered by lenders without having to pay them a penny.

Jon Robson, a freelance writer with a keen eye for personal finance deals – in particular the uk credit industry – suggests that before you next use your credit card you should check the introductory offers from at least one other competitive uk credit card company.

Article kindly provided by UberArticles.com

Topics: Credit and Debit | Comments Off

Tags: Credit, Credit and Debit, credit cards, family, Finance, home, income, Loans, money, Personal Finance

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