Very basic credit card terminology question

BridgetTheCat

There are other advantages to using a credit card.
* it acts as a buffer between your bank account and the person you’re paying in case they’re a fraudster intent on cleaning you out 
* you get protection under S75 of the Consumer Credit Act which makes lenders jointly liable with sellers when things go wrong 

Desmond_Hume

Plus other benefits, like rewards. 

molerat

Rosenkrantz said:

so in this scenario, is the benefit that you have a few more days grace to find the money for something as compared to paying with cash/a debit card? I'm basically struggling to understand why someone would use a credit card that doesn't have 0% interest

All credit cards effectively have 0% interest as long as you pay the full statement balance by the due date, in that case any interest is waived. I spent £1100 on a furniture item on 27th January.  I "paid for it" from my bank account 13th March, other items purchased back to 14th January were on that statement.  That money was in a savings account and earned around £5 interest whilst waiting, extrapolate that across all my annual spending and it adds up to a tidy sum.  Plus if anything goes wrong with the item there is s75 protection where the card provider is equally liable with the retailer.  I currently buy just about everything with my CC generally keeping under £100 in my bank account.  Obviously it takes discipline not to spend what you do not have / cannot afford but means I can, IMO, budget easier.  With a debit card what happens if you need petrol on the evening before your pay goes in, even worse what happens if you have £10 left in the bank and want to put in that amount of petrol and there is only pay at pump available ?  Plus responsible use of a CC is a positive factor on your credit file, helpful when you want to get a mortgage.

TadleyBaggie

Rosenkrantz said:

 I'm basically struggling to understand why someone would use a credit card that doesn't have 0% interest

I use two credit cards every month for regular expenditure, and pay off every month. On one I get cash back , on the other Nectar points. I've also used a Chase debit card in the past for the same reason, but with constant erosion of the cash back that has now been dumped.

km1500

Rosenkrantz said:

km1500 said:

If you don't pay off the balance spent in that month you will get charged interest on everything you spent that month

So if your statement balance is £1000 and you pay off £999 then you still get charged interest on the £1000 of spending - you have to pay it all off to avoid interest

thanks. Ok, so, next silly question - why would someone use a credit card for doing this and not just a regular debit card?

they may not have enough money in their bank account to pay by debit card

So for example they may need a new car tyre but may not have enough money in their bank account to pay by debit card.  so they pay by credit card and then when their salary comes in at the end of the month they pay off their credit card balance

or they split it over two or three months but would then pay interest.

lr1277

Now that you have read the MSE guide (which I haven't read) are you clear on what payments you have to make and when?

itsthelittlethings

There are very few 0% cards that offer 0% on purchases indefinitely.

QrizB

itsthelittlethings said:

There are very few 0% cards that offer 0% on purchases indefinitely.

Sure, but during the 0% period you set the DD to "minimum payment" and when you get close to the end of the 0% period you:

- pay it in full, or

- balance transfer to another 0% card (ideally at 0% fee).

Brie

QrizB said:

itsthelittlethings said:

There are very few 0% cards that offer 0% on purchases indefinitely.

Sure, but during the 0% period you set the DD to "minimum payment" and when you get close to the end of the 0% period you:

- pay it in full, or

- balance transfer to another 0% card (ideally at 0% fee).

or you could pay off a set amount each month to ensure the full balance is cleared over the 0% period.  So if you spent £1200 and set the payment to £100 then the full balance would be cleared in a year.  That's a nice thing if you are budgeting.   

surreysaver

Brie said:

QrizB said:

itsthelittlethings said:

There are very few 0% cards that offer 0% on purchases indefinitely.

Sure, but during the 0% period you set the DD to "minimum payment" and when you get close to the end of the 0% period you:

- pay it in full, or

- balance transfer to another 0% card (ideally at 0% fee).

or you could pay off a set amount each month to ensure the full balance is cleared over the 0% period.  So if you spent £1200 and set the payment to £100 then the full balance would be cleared in a year.  That's a nice thing if you are budgeting.   

You'd obviously have to make sure the fixed amount covers the minimum payment if doing this.
But if you've got a 0% credit card, surely it makes more sense to make full use of the 0% period and only pay the minimum payment?