Is a Credit Card the way to go? If so which one?

thebottomline

Hello all,

Apologies for the probably very simple questions, but I've never taken out a credit card and while there are some really good guides on here, I can't seem to find an "idiot guide" on the basics, so sorry if these are foolish questions:

1) What exactly can you use a Credit Card for outside of High Street Retail purchases? Can you pay electricity bills, rent, etc.? And I'm getting the impression from the guides that you shouldn't just take cash out from an ATM from your Credit Card?

2) Paying the interest - firstly, is this compounded? e.g. a 12% APR rate would be 1% per month, on a £1,000 debt that would be £10 for the first month, then if you spend no more but didn't pay that off, for the next month would you be charged 1% on £1,010 - so taking balance to £1,020.10?

3) For these "0%" interest - it seems there are often minimum repayments per month of 1% of the balance or £25, whichever is greater, and the articles always say to set up a direct debits - how do you set up a direct debit on variable amount? Is this done through the credit card company?

4) How long does take from application to card in hand and ready to use? I am leaving for America 11th July for 10 days so want to know if it's a week, month, etc.? Instinctively it feels like they'd want it in your hand ASAP... if you go to a physical outlet can they turn it around quicker than an online application?

5) Is short term credit card debt the best solution for me in this particular circumstance - my wife and I are going to the States for a couple of weeks to travel, and are not really sure how much money we're going to need. We have a few hundred pounds (left in my 0% overdraft) that we can use for travel money, and have a £10k bank loan that has 3 years passed, 2 years left on it. I have never defaulted payments on either, and between us we earn a decent amount of money and can exit a month circa £400 net up where we were at the start if we're particularly frugal, but don't have any cash at present following a big deposit from a new tenancy starting, and really want some buffer or freedom to enjoy the trip more. What would be best, a long term 0% UK credit card that I do all my shopping on between now and then and have more in my bank to convert to $ and spend out there, or a strong foreign credit card to use out there?

I hope you can help, thanks for any assistance!

Regards,
Tim

grumbler

thebottomline wrote: »

1) What exactly can you use a Credit Card for outside of High Street Retail purchases? Can you pay electricity bills, rent, etc.?

Not really, although there are some exceptions. E.g. some councils take credit card payments for council tax.

And I'm getting the impression from the guides that you shouldn't just take cash out from an ATM from your Credit Card?

Most cards charge flat fee for withdrawals. Also unlike for purchases, you pay the interest from the day one.
For purchases - if the balance is paid in full and in time - the interest is waived.

2) Paying the interest - firstly, is this compounded? e.g. a 12% APR rate would be 1% per month, on a £1,000 debt that would be £10 for the first month, then if you spend no more but didn't pay that off, for the next month would you be charged 1% on £1,010 - so taking balance to £1,020.10?

It is compounded. Generally, a CC is an expensive way of long time borrowing, but again, there are some exceptions.

And if monthly rate is 1% then APR is 12.68%, not 12%.

3) For these "0%" interest - it seems there are often minimum repayments per month of 1% of the balance or £25, whichever is greater, and the articles always say to set up a direct debits - how do you set up a direct debit on variable amount? Is this done through the credit card company?

It's the CC company that takes the payments and they know this.

4) How long does take from application to card in hand and ready to use? I am leaving for America 11th July for 10 days so want to know if it's a week, month, etc.? Instinctively it feels like they'd want it in your hand ASAP... if you go to a physical outlet can they turn it around quicker than an online application?

This depends. I don't think that going can speed this up. You stand a good chance to get it before leaving.

5) Is short term credit card debt the best solution for me in this particular circumstance - my wife and I are going to the States for a couple of weeks to travel, and are not really sure how much money we're going to need. We have a few hundred pounds (left in my 0% overdraft) that we can use for travel money, and have a £10k bank loan that has 3 years passed, 2 years left on it. I have never defaulted payments on either, and between us we earn a decent amount of money and can exit a month circa £400 net up where we were at the start if we're particularly frugal, but don't have any cash at present following a big deposit from a new tenancy starting, and really want some buffer or freedom to enjoy the trip more. What would be best, a long term 0% UK credit card that I do all my shopping on between now and then and have more in my bank to convert to $ and spend out there, or a strong foreign credit card to use out there?

Normally cards charge ~3% for currency conversion, plus for ATMs. There are a few cards that don't charge, but they are not best for long-term borrowing.

• Cheap Travel Credit Cards
• Spending 0% Cards

If you have a good credit history you can after spending get a new card with low interest rate and transfer the balance to it:

• Balance Transfer Credit Cards