basics!

longhop

Hi there,

Please forgive my ignorance but I've never had a credit card and want to sign up for one with free gifts/cashback.

Im not looking to carry any debt and will pay off every month so that its at £0. The balance tranfer... is that when im paying off the outstanding amount on the credit card?

I think I just 0% on purchases for as long as possible with the best free gift? And then at the end of the 0% purchase just cancel the card and sign up for another?

Is there a limit on how many credit cards I can have?

Sorry I know these must be simple questions.

KiKi

Hi there

A balance transfer is not paying off your card. A balance transfer is when you owe Credit Card A £3500, for example, and you transfer that DEBT to Credit Card B. You are transferring the balance (a debt) elsewhere - usually because Credit Card B has a lower interest rate.

If you are going to pay off the amount you owe in full EVERY month, then a balance transfer is irrelevant to you.

You do not have to pay interest on a credit card if you pay what you owe, on time, every month. (There are some exceptions: if you use gambling websites, or withdraw cash from a credit card, or undertake any transaction considered to be a 'cash advance' you DO have to pay interest from the day you make the transaction.)

Therefore 0% on purchases is also irrelevant to you if you are going to pay it off in full EVERY month. You only want 0% interest on purchases if you: only pay the minimum off the credit card every month, and keep the rest of the money that you would have spent on the card in a high interest account to get the interest there. In the long-term, you get a bit more for your money which you're keeping in your account, and then pay off the remainder on the credit card when the 0% is up. However, unless you're going to spend thousands, the benefit you gain from this is absolutely minimal. I wouldn't recommend it if you're very new to credit cards and don't understand how they work.

Yes, you can just cancel the card and sign up for another, but unless you're actually going to take advantage of the 0% interest by only paying the minimum each month and getting interest in your savings account from the money you're *not* paying back (until the end of the 0% term) then you don't need a card like that.

You might be better off getting a cashback card (pays you a percentage of everything you spend) or just the free gifts.

There is no limit, but every time you apply for a credit card (or any type of credit, like a mobile phone contract or a mortgage), the company does a 'search' on you. This tells them your credit rating - how responsible you are in paying money back that you owe. Every time a search is done, it's recorded on your credit file. If you apply for lots of cards, it can look like you're desperately searching for credit, ie, you're in financial trouble. Equally, if you have no credit rating (because you've never had credit before), then you may be turned down because the company can see no evidence that you are a responsible customer. As a rule, don't apply for more than three cards in six months - and if you keep getting turned down, stop applying.

And two golden rules: do not get credit cards unless you can control your spending and pay back on time; NEVER, EVER, EVER use a card for 0% on purchases AND 0% on Balance Transfers. Only ever use them for one or the other (for reasons I won't bore you with).

One last 'basic' you should know: If you owe £150.10 on your card, and make a payment of £150.01 on time (ie, you make a slight mistake and are 9p short), you will owe interest on the WHOLE £150.10, not just the 9p. So either ensure you are always paying back the full amount, or set up a direct debit to do that so there's no chance of making a mistake.

Long-winded, sorry, but I hope it helps you.


KiKi

Moggles_2

longhop wrote: »

I've never had a credit card and want to sign up for one with free gifts/cashback.

If this would be your first credit card, you may have a limited credit history. What other credit facilities are held in your name?

It takes time to build a good credit rating. The bank that holds your main current account may be the best place to start. Once you've operated this and at least one other credit card for a bit, you'll find it easier to get the cashback cards and credit limits you want.

For tips to improve your chances of credit card acceptance, have a look at the *Credit Rating: how it works and how to improve it guide*, especially Martin's *Manage and Improve your credit score* article

http://www.moneysavingexpert.com/banking/credit-rating-credit-score#improve