Related Credit Card Article

"Credit Card Charges, Interest, Fraud and Bad Credit"

By admin | October 11th, 2007 | Credit Card Guide

Unless you plan to repay your credit card in full each month, the rate of interest you will be charged on your outstanding balance will need to be one of the most important things you consider before applying for a credit card.

That said, it is possible these days to disguise the real rate of interest that you pay on you credit card. The reason why this is the case is because although UK credit card providers are required, by law, to display the APR they charge on their cards, they do not need to include a variety of additional fees and costs in the calculation of APR.

Consequently, it is possible to display a lower APR than other credit card providers’ do, but to include joining fees and annual membership fees, which other credit card provider do not do. This way, your headline interest rate looks lower, but your cumulative fees and interest are actually higher.

Fixed rate vs. Variable rate interest

Although most credit card providers in the UK are required to display their APR, in most cases APR is a variable rate, thus subject to change at any time – provided appropriate notice of such is given. As a result, if you are prudent and knowledgeable about such things, and believe interest rates may vary over the period of your credit card debt, you may try to fix your credit card interest period for a fixed term.

Keep in mind, however, that fixed interest rates can run counter-productive if variable interest rates fall below that of your fixed interest rate. As such, if you find a UK credit card provider willing to offer you a fixed rate of interest, at the back of you mind you should be asking yourself why this is the case.

That said, an exception to the fixed rate vs. variable rate debate can occur if you already have a credit card and are looking to transfer you balance to a new credit card provider. In such a case, it is possible to fix your credit card interest, usually for an initial period of 6 months, at extremely low and attractive interest rates – as part of an introductory offer. If this happens to be the case, you still need to check and make sure that:

* you do not lose the introductory offer if you default on any monthly repayment during the period of the introductory offer, thus making the interest rate revert to the normal rate, which may be higher than you were previously paying;
* the promotional low rate of interest applies to the whole of your outstanding balance, and not only to ‘new’ items you charge to your credit card after you have transferred the balance, with the transferred balance accruing interest at the normal APR
* you will not be charged a penalty payment if you decide to transfer your balance to another credit card provider either during the promotional period, or shortly thereafter.

If any of the above does not hold true, you may find that it works out cheaper to remain with the credit card provider you currently have.

Penalty Payments

Penalty payments are a major pain with having a credit card. Normally you would think that there is little or no chance you will be charged a penalty payment for using your credit card. However, unless you read your credit card terms and conditions carefully, you may find you end up having to pay any one or more of the following penalty fees:

* late payment fees: levied against you for failing to pay your monthly minimum repayment on time
* ATM fees: levied against you if you make a cash withdrawal using your credit card – especially so if you use your credit card overseas!
* ‘out of area’ fees: rare, but sometime levied against you if you use your credit card overseas
* You also need to know that all of these penalty fees do not include any penalty interest you may be asked to pay for having incurred the penalty event.

As a result of the above, carefully reviewing your credit card statement each month to see both what has been charged to your account and what fees and interest has been charged is of paramount importance. Don’t just briefly skim the statement and hope all is okay, because if you do not object to any entry within the allotted time for doing this, this means you agree to the charge that has been made!

Credit Card Fraud & Security

Credit card fraud now costs UK credit card provider millions of pounds each year. The problem is huge and growing. As such, credit card companies are now taking steps to combat the level of fraud that is taking place.

The following is a look at some of the primary ways in which the fraud is being committed and also a look at how the credit card providers are fighting back against credit card fraud.

Personal Identity Theft

Last year alone fraud cost the UK credit card business over £1billion – and it is estimated that identity theft accounted for approximately 10% of that sum! While you may well not be held responsible by your credit card provider for fraudulent transactions made on your card, if the credit card provider is of the opinion that you contributed in any way to the theft of your personal information.

As such, to ensure that you are not held accountable for any theft of your personal information, you should ensure that:

* when you use your credit card you never let the card out of your sight
* if the outlet where you use your card uses the old carbon-copy paper system, take the carbon-copy with you and destroy it at a later date in a safe place
* never use your credit card on an unsecured website
* never use your credit card to withdraw money at an ATM that you have not previously used
* never throw your rubbish out if you have not shredded all of the information so that it cannot be read in any useful way
* treat all mail as confidential – and if you do not receive mail you are expecting, such as a credit card statement, inform your credit card company immediately that you think something may be amiss.

Fraud Prevention Tactics

In addition, fighting back against credit card fraud, UK credit card providers have started to incorporate some (if not all) of the following credit card fraud preventive measures:

* identification photos on your credit cards;
* fingerprints on your credit cards
* chip and Pin systems whereby the card has an encrypted chip containing details about the card and a PIN that ensures the card is being used by the genuine user
* Insurance

A great number of UK credit card providers now offer their cardholders the chance to insure themselves against any potential fraudulent use free of charge, or at a percentage of the then outstanding balance.

Given the level of credit card fraud currently taking place in the UK, it is highly recommended that you consider taking your credit card provider up on this offer if you think there is even a remote chance you may be faced with a bill for any fraudulent transaction made on your credit card. To determine the chances of this happening, you need to review the terms and conditions of the issue of your UK credit card carefully.

Credit Cards & Bad Debt

UK households are currently indebted to UK credit cards to the tune of £200 billion. It is, therefore, a very sad fact that large numbers of people in the UK get into debt as a result of having being issued a credit card. In some cases it could be argued that the credit card companies are at fault for making credit cards available to people who obviously cannot afford them.

Notwithstanding this, in the event that you leave a credit card debt unchecked, you will be held personally liable for this and it could well affect your life for years to come. As such, if at any time you feel that the level of your credit card debt is becoming overbearing, you need to take immediate steeps to counter this.

In order to overcome your credit card debt problems you can:

* enter into agreement with your credit card company to repay an amount affordable to you, which may be less than the minimum monthly repayment;
* enter into an agreement with your credit card company that they do not charge you excessive interest and default interest while you arrange to repay the outstanding debt, on the understanding that you will repay the then outstanding principal debt;
* discuss your circumstance with a debt counsellor, who can act on your behalf talking with your credit card provider to come to some arrangement for you to repay your credit card debt. You then need to make sure you make the payments as agreed to your debt counsellor, who will then arrange for these payments to be made to your credit card provider.

Keep in mind that credit card debt counts as being one of the major reasons people cite for stress and is often seen as being a contributing factor in a number of suicides each year. Do not let your credit card debt become all consuming by remembering to use your credit card sensibly.

Improving Your Bad Credit Rating

If you find yourself in the position where you have a bad credit rating as a result of your misuse of your credit card, do not think of it as the end of the world – it is possible to improve your credit rating.

You can start to do this by using prepaid credit cards and by making sure you repay all of your outstanding debt on time according to the agreement you have with your creditor. Keep in mind that the maximum period you are likely to have a bad credit rating for in the UK, even in a worse case scenario, is 7 years.

Tags: bad credit credit cards, credit card charges, credit card interest, credit card penalties, identity theft

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