Can someone explain credit cards to me?

[angel21]

I've never had one. In's and out's please.

[fishy-finger]

Hui there angel. May I just start by saying what a very charming and beautiful name you have. A credit card is a flat bit of plastic approximately 1mm thick. its dimensuiions are 85mmx 55mm. It has a long number a long the middle which is 16digits long and unique to the card. It also has when the card was issued and when it expires along with your name at the very bottom.On the top right there should either be a Visa Mastercard sign depending on which card you have. And recently they have put chips in them which is a square bit of metal.
Turning the card ocver we have a rectangular white section where the card holder signs for security and there will be some security numbers on the back which you need to use when buying over the phone or on line.

Hope this helps

[angel21]

Well I was hoping for some serious answers!

I'm 21 and never had a credit card but I was thinking sooner or later I'm going to end up having one as this seems like the only way most people are able to have the lifestyle they desire.

So, for example, I was wondering, do you get to choose a limit of how much you spend on the card so you can't go too mad, when do you have to pay it back by and how much do you have to pay each month say on a �500 spend a month

[Ethel]

I have several credit cards and they have never cost me one single penny,

I use my Tesco card to pay for everything I possibly can - all my shopping, some bills - as much as possible. I pay it off in full every month, and earn Tesco points each time I use it and it does mount up.

I keep my Nationwide credit card for spending abroad - it is by far the best way. I use Nationwide because there are no charges for using it abroad - most cards do charge.

I use my MBNA card for very large purchases when it has a 0% promotion, meaning my savings are still earning interest and it gives me time to save up to pay it off.

When you buy something over �100 on a credit card the law states the credit card company is just as liable as the company you bought it from if something goes wrong. So, if I had ordered �500 worth of goods from Woolworth's in December, the credit card company would have to refund me when the goods didn't arrive because Woolworth's went bust.

I would not dream of paying for large purchases any other way.

[angel21]

So how quickly do you have to pay the debt off?

[fishy-finger]

angel you can only have 'the lifestyle you require' until you reach the credit limit. Mine was a serious answer anyway.

[fishy-finger]

to not incur any interest charges you have to pay it off within a month of buying...

[Ethel]

You have to pay back around 3% of the balance every month but if you do that it will take forever to pay off, and if you are charged interest it will cost a fortune.

Far better to ALWAYS pay it off in full every month, unless there is a 0% interest charge.

If you can't control your spending, don't get one.

[angel21]

If you have to pay it off in full in a month to avoid incurring interest charges then you have to save the money up ready still so why not just save it up and then buy the thing you wanted? Am I missing the point?

[craft1948]

I never got a credit card until I was 42!! I used to pay cash for everything but then I started on-line shopping.
I too have a Tesco credit card which I use for everything as you get Tesco points when you use it.
My credit card statement comes around the 20th of each month and I have until the 14th of the next month to pay it. I always pay in full online using my debit card so have no hassle involved.
Therefore, in theory, I can buy something on the 21st of Feb and not pay for it until the 14th April.

[angel21]

Do you mean you can buy something in Feb and not pay for it until March?

[Ethel]

It's all down to managing money.

I get vouchers worth several hundred pounds every year just for using the Tesco Credit Card.

If I spend on the 1st of the month, I have 6 weeks interest free credit before it needs to be paid off. My money is earning interest in the bank during that 6 weeks.

As I already said, the law provides extra protection if I use the card to buy goods or services over �100.

If I lose my credit card, or it is stolen, I can cancel it and I have lost nothing.
If I lose a purse full of money, it is gone.

[angel21]

Oh I see, you buy it day after your statement comes - wait for next statement and then the month after that you pay it? So you don't have to pay for it until after you receive your statement then?

[craft1948]

My statements are always up to the 20th of the month and have to be paid by the 14th of the following month so if I buy something on 21st Feb it will appear on my statement dated the 20th March which I have to pay by 14th April.

[craft1948]

I also use ebay quite a lot and for most transactions you need a credit card (to pay via PayPal)

[angel21]

You get quite a lot back in vouchers then Ethel. My money doesn't earn that much interest in the bank so I'm not bothered if I take the money out. True about not losing any money as you can cancel it.

So can someone write me a pros and cons list then?

[annie0000]

To add to ethel's reply.

Generally when you take out a card, your spending limit will be agreed at the outset, however, some companies will increase this if you reach the limit - not necessarily a good thing.

basically, if you are really well organised, like Ethel, then they are undoubtably an asset.

If you are not, then you run the risk of getting into debt very quickly - the interest on the cards (apart from introductory offers) tends to be higher than a loan and if you pay only the minimum, you could be paying back triple what you spent.

I have a credit card, but I use it for buying things on-line and for large items for the insurance, I do however pay it off monthly and it costs me nothing.

If I needed a large item urgently, and didn't have the money to pay for it, i would take out a loan and buy the item with my credit card and repay the card with the loan, then you have the insurance protecion and you have to repay at a fixed rate and are commited to paying it back in the time you intended.

[Ethel]

craft - PayPal prefer you to use a debit card, it is cheaper for them. You don't need a credit card to buy on eBay using PayPal

[angel21]

I don't buy much on ebay but have always used my debit card for paypal puchases? I have heard you get more security online with a credit card than with a debit card though?