Credit Card Applications Tips

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Best Credit Cards and Credit Card Applications Tips

Want to apply for a credit card ? Looking for the best credit card offers ? If you can possibly avoid it then do not apply for a credit card - even a 0 interest rate credit card!

Credit card companies are there to make money out of you, not the other way round, they have also been increasing their interest rates lately, despite the fact that governments around the world have been reducing their interest rates to almost 0.

Not content with making money from their normal credit card practices they also apply a number of abnormal shady practices to catch you out. Such as, for example, changing the credit card interest rate after you have signed up, as MBNA have just done, increasing the rate on one of their credit cards from around 18% to around 30% - if you don't like the new rate you are invited to phone them up and cancel your card, in which case you will be charged your old rate until you pay off the balance, but you will be unable to use your credit card.

Below is a list of credit card tips to bear in mind.

First, if you are looking to transfer your balance to a 0 interest credit card - then check before you fill in the forms just who it is that is issuing the card. MBNA issues cards under over a hundred different brand names and you will not be able to transfer balances from one of the brands to another.

Similarly you will not be able to transfer balances from a Halifax credit card to a Bank of Scotland card or presumably a Lloyds credit card, as Halifax is now part of Lloyds.

So before you apply for a credit card, check that the new company is not the same as the old one.
Secondly, make sure you check the fees. If you are looking for a balance transfer then you will almost certainly be charged anything from 2.9% to 4% for the privilege. So your 0 APR balance transfer does not look quite so tempting.

Thirdly, bear in mind what is known as "negative payment hierarchy".

Almost all credit cards operate a negative payment hierarchy. This means any payments you make are allocated to the cheapest debts first, e.g. if you transfer a $5000 balance onto a o interest balance transfer card, and then spend $300 on the same card, then make a payment of $400, that $400 will be deducted from the $5000 balance transfer. The $300 you just spent will be charged interest and will continue to be charged interest until the $5000 is paid off in full.

Moral of the story : NEVER EVER use a credit card with a 0 apr balance transfer for anything else.

Fourthly, credit cards with uneven promotional periods, i.e. 0% for 12 months on balance transfers, but only 0% for 3 months on purchases. After 3 months you will fall into the trap of negative payment hierarchy (see above). So only use credit cards for one purpose only – purchases OR balance transfers but not both.

Bear in mind also that these traps are deliberately put in place by the credit card companies to get money out of you by underhand ways, they are not devised by accident.

Fifthly, don't miss a payment. Missed payments negatively impact your credit rating, and one accidental missed payment will result in a fee for the credit card company and your promotional interest rate will be cancelled and you will be put on their current rip-off interest rate.

If you do a miss a payment, then phone up the credit card company. They may reimburse the fee and they may reinstate the 0 interest rate.

If you can then it is preferable to set up a direct debit to pay the minimum payment each month.
Sixthly, Payment Protection Insurance (PPI) - don't do it !

People working at credit card companies generally are obliged to try and flog you PPI (payment protection insurance). Just say NO. They don't like having to try and sell it and they find it very stressful and it is not in your interest to take it out. If a credit card company wants to secure its unsecured loans then it should take out its own insurance. Why should YOU have to pay for THEIR insurance ?

Seventhly, watch out for fluctuating payment dates. Credit cards companies will change the payment due dates in order to try and catch you out. They will also send statements out quite late so that you may think you have three weeks to pay your bill whereas in fact you have only two weeks. So make sure you check the payment due date every time you receive a sttement from a credit card issuer.

Eighthly, if you have a promotional interest rate, then make sure you phone in one month before expiry of the promo to find the exact date of expiry. That was you can arrange a balance transfer before your promotional rate expires.

If you can avoid it then do not pay off one credit card with a loan from someone else. Credit card companies run regular credit checks on your creditworthingess and they look at the big picture (mortgages, other credit cards, loans, etc.). They can now exchange information with other credit card issuers and discover who are the credit card hoppers. Avoid hopping as much as possible, as you may be refused a credit card and if that happens more than once in a short span of time, then your credit rating will suffer.

Also, be nice to the people at customer service they are generally helpful, except the ones in India (who seem to take a perverse pleasure in protecting their bosses bonuses)

Finally, do everything you can to not use credit cards and to try and get out of debt. Despite interest rates plummeting during this credit crunch, interest rates on credit cards and personal loans have in fact gone up. So what you are saving on your mortgage you will be losing on your credit cards. There are ways of making money on the Internet if you need extra money - for more information see make money on the Internet from blogs.
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