Please help me with a few basic questions

pharmakopoeia

I've never had a credit card and I'm finding all the new terms a bit overwhelming, whilst answers to a few basic questions seem to be hard to come by.

Briefly, the reason I'm looking into getting one is because I inherited a property that was being rented out, which I'm planning to move into to renovate and then sell within 12-16 months of moving in. However, this will mean both leaving my job and losing the rental income. I've no savings. Hence the need for some credit, which I want to clear after selling the house.

If you can help me with answering any of these questions, I'd be much obliged. Would also be very useful if you could write the number of the question/s you're answering so that it's clear to me.

1. I call up the credit card company to apply for a credit card. Do I agree with them at that point how much I am getting put on the card? What sort of amounts are we talking here, potentially?

2. What's the monthly spending limit about? How can I find out what it's likely to be?

3. 0% interest for 18 months: so this means that I won't be charged interest for anything I pay for with the credit card for the first 18 months, after which rates become astronomical. What's the catch?

4. Repayment: after I sell the house, can I then pay back what I owe in one fell swoop? Or do you have to set the rate of repayment at the start?

5. Are there any tax implications for any of this?

6. Do all companies accept payment by credit card?

Thanks for any help!

Tigsteroonie

(1) There is no guarantee that you'll even get a credit card, that depends on your credit history and whether the lender thinks you are a good risk. Make sure you look at the MSE guide to credit cards to work out where the best deals are, then apply - these days, it's generally an online application. The credit card company will decide the maximum amount you can borrow (your "credit limit").

2. You don't have a monthly spending limit. But you will have a minimum repayment that you need to make monthly - and this will depend on the card. Some are 3% of balance, some are 5%, some have a minimum figure also (so 5% or £10).

3. Make sure if you want 0% that it's 0% on purchases. What's the catch? Well, you might forget to make monthly repayments, in which case you've reneged on the contract and they can charge you interest; you might withdraw cash, which won't be 0%; and as you say, after 18 months the interest rate will suddenly appear.

4. You can repay the balance whenever you want. Just remember that you also need to meet the minimum monthly repayments in the meantime.

5. No tax implications.

6. No, but reputable companies will.

pharmakopoeia

Thank you, that's helped a lot.

The only thing I'm still struggling to get is concept of the credit limit.

The purpose of the exercise is to assume that I could get a credit card. I don't have any debt history for what that's worth. But let's just assume anyway.

Santander's website says that their 18 month cards have a credit limit of £1200 (potentially). What does this mean? I can't spend more than £1200 during the entire 18 month period?

If that's the case then I'm guessing that if I'm looking for a loan of £10,000 then I won't get it on a credit card?

Tixy

The £1200 on the website is for illustrative purposes.

The credit limit they offer you will depend on your circumstances and credit history. It could be as little as £250 (meaning that £250 is the maximum debt you can have on the card at any one time) or it could be £15000.

In your situation if its your first card and you are going to have no job and income then I would imagine you will towards the lower end of that range.


If you did get a limit of £10k and spent up to that limit would you be able to afford the minimum payments with no income (which could be say £250 a month?)

grumbler

pharmakopoeia wrote: »

The only thing I'm still struggling to get is concept of the credit limit.

You spend on the card and you make payments to the card.
The interest is added every month (if it's not 0%) unless you don't pay the balance in full.
Fees are added to the balance for cash withdrawals.

You can spend the limit in one transaction if you wish, but at any instant the balance has to be smaller than the credit limit.

Tigsteroonie

Sounds to me like you want to borrow £10,000 and not have to make any repayments on it for 6-12 months while you renovate the house.

Have you considered a loan secured on the property for £15,000, and then using the surplus to fund the repayments during that period?

Whiner

The government making all these stupid rules and regulations, one of them being the "You must display a £1200 credit example rule" is absolutely ridiculous; the amount of people who assume that this will be their credit limit, or the maximum amount they can spend means it is not widely understood what the £1200 is all about.

Therefore, is there really any point the card companies having to display it? It makes nothing any clearer.