Credit Card FAQ - E.G What Are 0% and Interest Free Credit Cards?

Here are some frequently asked credit card questions which may also assist:

Q: What is a store card?

A: These are a type of credit card offered by retail stores such as Tescos, Sainsbury's or Marks & Spencer the only difference is these cards can only be used within their specific retail group, unlike other credit cards which can be used anywhere credit cards are accepted. You earn points and discounts when you spend at that store which can be used for shopping costs or exchanged for vouchers and air miles amongst other things. These cards can have higher than average interest rates but if you do a lot of shopping at that store the discounts and rewards can be significant.

Q: Can I get a credit card if I have a bad credit rating and/or county court judgements?

A: Yes, there is usually a card for everyone, if your county court judgements have been cleared, but you will pay much higher interest rates up to 40%, if you do have a bad credit rating, so it can be a very expensive way to borrow money.

Q: What if I have existing credit card debt?

A: Most credit card issuers offer low introductory rates on transfers of existing balances. Whilst most of the very low APR offers (often 0% interest) are only valid for six months or so, some credit cards have a low APR for the life of the balance, some as low as four or five percent.

Q: What if I get declined for a credit card?

A: Most credit card companies have an appeal process, the first step is to ask the issuer why your application has been declined, there may be several reasons. If it was as a result of a bad credit reference you can ask the credit card company which credit reference agency they used and, if you haven't already done so, you can contact the credit reference agency and check out the credit reference yourself for a small fee. Sometimes credit information about you is incorrect or has been affected by someone else fraudulently using your name and information so it is worth checking this out. If you have been declined because you don't meet the credit card company's lending requirements you may have to approach another credit card company who may have different criteria, or investigate alternative types of lending.

Q: What are student credit cards?

A: Student credit cards allow banks to establish a credit relationship early on that they hope will last a lifetime. Student credit cards usually have higher than average APRs particularly for cash withdrawals and limited access to rewards and benefits. However many of them do offer discounts at bookshops or gift vouchers.

Students can run into financial problems at university and some are forced to leave because of debt problems.

An important thing to remember is that if you fail to make payments (or run into difficulty) you will build up a bad credit history. Your credit history will become important later in life when you want to take out mortgages and other loans.

Q: What are 0% and interest free credit cards?

A: 0% interest and zero APR credit cards advertised as 0% APR usually have conditions attached (or are only relevant to one aspect of the card). For example, it only refers to balance transfers or to new purchases. Preferable rates tend to also be limited to six months or so, after which transfers and purchases attract the normal APR rate. Many companies offer 0% APR on balance transfers because customers owe money on other cards and are looking to transfer this debt to cut costs. It's also common for customers to switch cards again, if they haven't repaid their debt, once the introductory period is over - thus avoiding paying interest at all.

Credit card companies can offer 0% APR on new purchases for a fixed period. Once this period finishes the APR goes up. However, some cards maintain an interest free period on new purchases of up to 56 days continuously. This means you can buy a product and have an interest free period before you actually have to pay for it (which represents a financial saving - as long as you clear the debt within the specified period). While credit card companies offer 0% on balance transfers or new purchases, it's unlikely they will offer 0% APR on actual money borrowed.

Q: What are guaranteed credit cards?

A: A guaranteed credit card is another term for pre-paid credit cards. The majority of credit cards are unsecured, where the credit card company lends you money with nothing concrete to guarantee repayment. With guaranteed or pre-paid credit cards they are secured because, for a fee, you deposit money onto the card and only spend what is on it. Only spending what you have paid in means you are not able to exceed your funds and not get into debt. Payment onto the card may be made via direct debit, money transfer or across the counter in a high-street bank. Once you have paid money in you can use your card in the normal way at most places where credit cards are accepted, including cash withdrawals.

You usually don't need credit checks or a bank account to get one. Guaranteed credit cards can act as a stepping-stone to secure a better credit rating. Once you have strengthened your credit rating you can transfer back to an unsecured credit card. They provide a way for people who don't have bank accounts to pay for goods instead of using cash. Guaranteed or pre-paid credit cards are backed by both Visa and MasterCard and are accepted across the globe.

Some guaranteed credit card companies require a minimum security deposit to open the account while others charge you for owning a card, for example up to £75 for a card, a minimum deposit of £750 and a limit of spending up to 66% of your deposit.

Credit card FAQ - eg. What Are 0% and Interest Free Credit Cards