Glossary of Credit Card Terms

0% on credit card purchases?

0% on purchases means exactly that. You can go out and purchase something on your credit card and not have to worry about paying interest on that purchase for the introductory period stated.

An example would be to pay for a holiday on your credit card for £600 and pay it off over an introductory period of 6 months at a cost of £100 a month. Essentially you are spreading the cost but as long as you pay off your purchases within the first 6 months you won't get charged interest. If your purchases are not paid off in full by this time you will be charged interest.

If this is the case it would be a good idea to transfer the balance to a new credit card with an introductory balance transfer period. This is a common practice and those who engage in this option are known in the industry as a 'rate tart'.

0% on balance transfers?

0% on balance transfers gives you the ability to transfer another debt to your credit card. It allows you to pay this debt off without paying any interest for the introductory period stated.

The most common example is to transfer the debt from a credit card which is charging interest on your balance to an introductory 0% balance transfer credit card.

If you had a credit card which was charging you 15.9% APR why not switch that to a new credit card with 0% APR on balance transfers. It will save you money and help yu to pay off your debt. More money goes on paying if off than paying for the credit.

What are lifetime low rate credit cards?

With the many credit cards on the market offering introductory periods for balance transfers and purchases it can be a hard task if you are not organised to keep switching your credit card on time so not to get hit with huge monthly charges if you forget about your introductory period running out - especially if you have a large balance on your credit card.

There are some consumers who opt for paying interest but instead agree to a constant low rate which they know they can afford instead of a higher APR. Obviously you arent going to save yourself money but if you think that you are not organised to keep switching your balance to a new low rate card before your introductory period runs out then it is certainly the better option.

If your credit rating is not the best then it is certainly worth looking into a low rate credit card and settling on it. By switching cards all of the time you can leave foot prints all over your credit reference score.

0% on purchases and balance transfers?

It is possible to find a deal on a credit card which has both 0% on purchases and balance transfers.

Be aware though that if you are transfering a balance you probably won't get as long an introductory 0% period because you are getting it for purchases as well.

If your sole aim is to transfer a large balance you would be best going for a credit card which only has 0% on balance transfers and getting an extended introductory rate of 0%. If you have a small balance to transfer and a couple of things to buy which you would like to spread over a couple of months then this type of credit card deal would probably best suit you.

What is APR?

APR is the typical percentage that is added on to your credit card annually. This is the charge for your credit that you use. All interest is calculated differently between each provider and varies. As a rule of thumb consumers look for the lowest possible APR.

What is a balance transfer handling fee?

Many credit card companies are aware of all the credit card holders who look to switch their balance all the time. To combat not making any money with these consumers the credit card companies are introducing handling fees.

These handling fees vary but currently the most common seem to be a charge of 2-2.5% of the balance you are transfering to the card up to a maximum of £50.

When searching for a credit card its often best to look out for the credit cards which don't charge a handling fee. They are available in the market place.

There is an upside. For paying a handling fee you tend to get extra time on your 0% introductory balance transfer period. If you have a big balance and you are being charged interest it may be a good option to transfer the balance even if you have to pay a handling fee because you will save more money by not paying the interest rate on your current credit card.

What is a loyalty scheme?

Some credit cards on the market come with a loyalty scheme as an incentive to use the card. If you know you are going to be using for card for purchases you can build your loyalty points up to swap in club shops for desirable items such as dvd players, digital cameras and more.

Many credit card consumers buy their weekly shopping on their card and pay it off immediately to only take advantage of the points on offer. If you know you need to buy certain things on a regular basis and you know you can pay off the balance immediately its a great way to take advantage of the schemes and be even more frugal.