credit card understanding?

m.a.d.s

I have a credit card which has a balance of £3500 on it and the 0% on purchases is going to run out soon. to be honest its the first card i have and dont really understand how credit cards work? at the moment im paying £21.00 intrest a month on cash @ 1.671% + the 3% which is around £85.00, the card has an APR of 15.9%. what will happen after the 0% on purchases is up, will i pay more a month on the £3500 or is it anything i buy on it after that time i will pay more on, or will all the intrest on the balance over the year be added on? any help to understand this would be great, sorry if its a stupid question.

YorkshireBoy

Your entire purchases balance (anything you buy now PLUS all you've previously bought) will start to attract 15.9% APR interest.

Your cash balance will continue to attract 22% APR, and be paid off last.

To be honest, you've done a pretty good job of racking up £3,500 of debt (in 12 months?) on your first card. Do you have a plan to repay it? Perhaps a BT to another 0% card, or maybe you now have additional income?

A word of warning, if the provider thinks you're struggling (and one of the tell-tale signs is cash advances), they'll be ramping up the rates to make sure they get as much as they can, while they can.

CLAPTON

Although credit cards can be very useful, the basic purpose of a credit card is to make lots and lots of money for CC companies.

So a few guidelines

Never, ever, ever withdraw cash from a CC... you pay a handling fee (often 3% ) plus high rates of interest from the date of withdrawal
- 1.671% per month is over 22% per annum.. a silly amount of interest
- any monthly payment you make goes towards the lower APR debt leaving you with the cash debt still on the card
- CC companies see anyone withdrawing cash as being desperate and likely to be financial difficulties and as Yorkshireboy says are likely ito increase the APR on the card.

Never use CC for long term debt... Ok if you occasionally need to pay interest for one month but you must aim to clear it down most months.

If you need a loan then there are lots of lower APRs than CC.

Basically clear the debt asap and then set up a DD for the full amount each month.
If you pay only the minimum amount each month then it will take you about 10 years to clear the debt and most of your monthly payment will simply be interest.

Treat it as a way of budgetting each month rather than borrowing.
Also section 75 is useful protection if you're buying high value products/services.

m.a.d.s

thanks for your replies, so let me see if ive got this right..... on a balance of £3500 once the 0% has run out the 15.9% APR over a year will be £556.50 so then if i split that by 12 that will be £46.37 of intrest. I pay 2.5% the min payment of the £3500 which is £87.50.
so the final sum is £87.50 my min payment - £46.37 intrest - £21.00 cash intrest = £20.13
so if im only paying £20.13 off my £3500 balance it would take me 14.5 years to pay off!!?
could anyone just confirm that i have worked this out correct please, many thanks

housingroulette

...correct;the trick is to 'jump ship'from your 0% deal about three weeks before your 0% deal ends,and transfer into another 0% deal with a differant company before the 15.9% interest kicks in and costs you money....if you feel that your credit score is a bit shaky(i.e.,perhaps you have made quite a few credit card applications,which can count against you),then it is smart to go for a low interest 'fixed rate' deal for lifetime of balance...the scoring criteria here is not quite so harsh,as the companies offering these deals know that they make money from day one-can be had for around 5 or 6%...much better than 16%!!

lotto-dreamer

You might find this useful -

http://www.whatsthecost.com/creditCard.aspx

m.a.d.s

Hi thanks for the replies, i am wondering if i will be better off getting a loan to consolidate my debts! although the interest may be around the same APR it will mean everything in one place and may work out quicker to pay off. The problem i have with this is my credit score as its bordering on fair! with this in mind will i find it hard to get a loan to do this?

m.a.d.s

Out of interest my wife looked on moneysupermarket at loans. She typed in that she is a homemaker with a low income(child benefit) and yet it still came back as good credit with possible loans for the amount we would need. Would a joint application help maybe as her credit is good & mine is Fair, or should she proceed with an application as the APR was very good?

CLAPTON

Presumably you have stopped using the CC?
If not then consolidation will unfortunately probably simply mean that within a year or so you will have both a loan and also CC debts.

If you have stopped using the cards then getting a lower interest rate loan would be OK but essentially you also need to pay more than 2.5% of the debt off each month. You need to look at your lifestyle and free up some more money to repay the debt asap.

If you get a join loan then you will be financially linked to each other and they will see the 'worst' of the two so I wouldn't advice this.

I didn't really understand your calculation
as you will pay 22% APR on the part of the debt that is 'cash advances' and 15.9% on the rest.
But the principle is right.. if you only pay the minimum you will take years to pay it off and incur loads of interest.