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credit where credits due..
Comments
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Although I'd agree with the rest of that comprehensive post I wouldn't entirely go along with the above statement as it stands! There are many people who always pay off CCs in full every month, for whom APR is therefore effectively irrelevant, so for these people there are other criteria, such as cashback or other benefits, which outweigh APR.
^ what he said. I couldn't give a monkeys if my standard interest rates were 10% or 50%.0 -
You missed out a bit:
The bolding is mine.
Are you serious or are you trolling? I suspect the latter.
I suspect that we're just going to have to agree to disagree - numerous posters (starting from the very first response) have made the valid recommendation that the best advice to OP is to start a CC history by paying off a card in full every month, which renders APR irrelevant. APR is of course relevant for those not able or willing to pay off in full every month. I suggest we leave it at that!0 -
On a side note... If you have to split £80 expenditure over 3 months on your credit card, maybe looking at your own situation would be wise. Not that you personally don't know what you're doing, but that's the point where a lot of people start to fall down the slippery slope. It wouldn't be so hard to save for 3 months to get to the £80, or just to pay in full.... There's no real advantage to spreading the cost over such a small period. What if you lost your job, or a source of income etc etc?
I've already slipped down the slippery slope and climbed back up again which took me a little over 6 years. So, yes, I do know what I'm doing.
To refer to payment of interest in such pervasive terms is of course ridiculous since credit cards by their nature provide rotating instant credit. That is essentially what they are used for. If that is not the case then why do 0% purchase cards and 0% balance transfer cards exist? It all depends on whether a card-holder can afford to pay the interest and is prepared to do so.
I would suggest to anyone new to credit cards to have a look at how Argos handle a balance on their card. That is essentially how a balance on a credit card should be handled.
http://www.argos.co.uk/webapp/wcs/stores/servlet/CreditAndInsuranceView?langId=110&storeId=10151&page=Credit%20%26%20Insurance%20homepage|Argos%20Card
I do however agree to a certain extent on the possibility of income being reduced. When I went down back in 2007/8 I didn't have enough capital to clear my debts which included an American Express card where the full balance was due to be paid. These days all balances and a lot more besides are covered by my rainy-day fund held in an instant access Cash ISA. Incidentally, it was back then when I wished I had PPI.0 -
I would suggest to anyone new to credit cards to have a look at how Argos handle a balance on their card. That is essentially how a balance on a credit card should be handled.
http://www.argos.co.uk/webapp/wcs/stores/servlet/CreditAndInsuranceView?langId=110&storeId=10151&page=Credit%20%26%20Insurance%20homepage|Argos%20Card
No.
That's how a credit card CAN be used.
0% Purchase and Balance Transfer cards are for people who want to be in debt, and that's how they manage their finances. That's fine for them.
A lot more sensible option is to only buy things you can afford, and if you do that on a credit card the best way to manage this is to pay off in full.
I disagree so whole heartedly with what you're saying.
I'm not saying that you can't do what you suggest, it's just not the best option. The time value of money is not that significant that it's worthwhile, especially on the short terms we are talking about here.
Like I said above, I have NEVER used any of the many 0% on purchases and 0% on BT offers that have been presented to me. They are not of interest to me. I do not want to get into debt that I am relying on paying off in a lump sum in future, because I don't know what the future holds. What if my roof falls in the day before I'm due to pay the balance on my CC? The roof is a higher priority, I pay for that, and then I'm lumbered with a whole load of interest.
At least in my world, my credit card is already paid off, and I can a) put the fallen in roof on the credit card with a cleared limit or b) pay with the savings I have that are not offset against any other debts.
Like I said above, it is far too slippery a slope, and it can also get very difficult to manage if you are not savvy enough.
I would have no objection in taking out a 1500% APR credit card that offered me 3% cash back on all spend. To be honest, for all I know about the rates on my cards, I could have done that already.0 -
Paying in full every month is the best way to manage a credit card, IMO.
* You never pay interest;
* You get S75 protection on purchases;
* You can earn interest on money you would otherwise have spent during the month (if you have an interest paying current or savings account you can keep the money in);
* You can earn cashback/rewards on purchases if you have a cashback/rewards card.
I put all regular spending on my card and repay it in full every month. I get 4% cashback on purchases up to a maximum of, I think, £9 per month, and I earn interest on the money in my Santander 123 account, that I would have spent during the month.What will your verse be?
R.I.P Robin Williams.0 -
There is a difference between debt and bad debt. The whole of the Capitalist economic system is based on a foundation of credit and debt. Even if someone is paying off the full balance it's still a debt that is being paid off.
Paying off the full balance every month is probably the biggest fallacy ever to hit a financial service. There are those who are stuck in a situation where they are unable to spend cash whether in its physical form or via a debit card because all their income is spent on clearing the balance. Related to that is the situation where a card is used to build or rebuild a credit history: Spending just enough to keep the card active has exactly the same effect on CRA accounts as using it extensively for everyday spending almost to the credit limit and clearing the balance every month. CRA accounts show the balance and credit limit and don't show how the card is used. So all a lender sees is history of nil balances or the same balance for every month which is never reduced, depending on the date the payment was made relative to the date the lender reports to the CRA. Better is a history of reducing balances.
By all means continue to pay off the full balance every month. That's your own personal choice. But don't fool yourself into thinking that you don't have debt.
Lastly budgeting is the process of balancing incoming funds and outgoing funds. If the extent of your budgeting is putting all everyday spending on a credit card and paying off the full balance every month then you are not proving your ability to budget!0 -
There is a difference between debt and bad debt. The whole of the Capitalist economic system is based on a foundation of credit and debt. Even if someone is paying off the full balance it's still a debt that is being paid off.
Do you have a point or is this just an observation?Paying off the full balance every month is probably the biggest fallacy ever to hit a financial service. There are those who are stuck in a situation where they are unable to spend cash whether in its physical form or via a debit card because all their income is spent on clearing the balance.
Not everyone overspends though.
Usually my credit card bill is about 25% of my wages each month. I have savings.Related to that is the situation where a card is used to build or rebuild a credit history: Spending just enough to keep the card active has exactly the same effect on CRA accounts as using it extensively for everyday spending almost to the credit limit and clearing the balance every month. CRA accounts show the balance and credit limit and don't show how the card is used. So all a lender sees is history of nil balances or the same balance for every month which is never reduced, depending on the date the payment was made relative to the date the lender reports to the CRA. Better is a history of reducing balances.
The lender gets to see payments made as well. So the lender would see that a balance is being cleared completely each month.By all means continue to pay off the full balance every month. That's your own personal choice. But don't fool yourself into thinking that you don't have debt.
I have debt on my credit card each month, but I could quite easily cut up the card and use my debit card instead. It wouldn't cause me any hardship whatsoever.Lastly budgeting is the process of balancing incoming funds and outgoing funds. If the extent of your budgeting is putting all everyday spending on a credit card and paying off the full balance every month then you are not proving your ability to budget!
My credit card bill each month is an outgoing fund. I balance my incoming and outgoing funds. Therefore, my credit card bill factors into my budget.
I really don't understand what you're trying to say. As others have said, just because you don't use credit cards this way and nor do many others, doesn't mean it's not possible!What will your verse be?
R.I.P Robin Williams.0 -
The lender gets to see payments made as well. So the lender would see that a balance is being cleared completely each month.
My point is not that the lender doesn't see payments but that they don't see how the card is used. That regular balance which is cleared could be payment of a single account. That's qualified by my statement that spending just enough to keep the card active has exactly the same effect on an account listed by a CRA as using the card for everyday spending to an amount close to the limit.
But payments do have an effect.
I can best illustrate by referring to my Aqua card account: When viewing that account history over the last 12 months a lender would see a regular payment every month for six months of £50 followed by a regular payment every month for 6 months of £100 alongside a history of increasing and reducing balances. I expect that to work in my favour when I apply for a prime card in September since it shows very clearly my ability to budget within the constraints of a credit limit and income. Yes, I pay interest but that is accounted for in my income and expenditure budget. Overall, the impact on income is the regular payment and spending and interest is not a factor .0 -
I can best illustrate by referring to my Aqua card account: When viewing that account history over the last 12 months a lender would see a regular payment every month for six months of £50 followed by a regular payment every month for 6 months of £100 alongside a history of increasing and reducing balances. I expect that to work in my favour when I apply for a prime card in September since it shows very clearly my ability to budget within the constraints of a credit limit and income. Yes, I pay interest but that is accounted for in my income and expenditure budget. Overall, the impact on income is the regular payment and spending and interest is not a factor .
You must be the perfect customer. Choosing to pay 29.9% APR as it "all works out in the budget" is an unnecessary waste of money. Think how much better your budget would be if you weren't paying interest.
Paying £50/month on, say, £1000, is £220+/year down the drain in interest. If you think that will set you up better for a prime card (as opposed to not paying interest), then you're quite mistaken.
And on the ability to budget - how is your method better than spending on a card and repaying it in full without incurring interest?0
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