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Credit Cards Explained

As a student you can expect to be offered a credit card wherever you go and in most cases you probably will get one. Before you do, make sure you understand how they work and be aware of the dark side!

What is a credit card?
It looks just like a debit card and can be used to buy things in the same way. When you use your debit card or cheque book you are drawing funds from your bank account, however with a credit card you are adding funds to a bill that you will have to repay at a later date. If you ensure the full bill is repaid before the monthly payment date you will benefit from an interest free period. If you miss the payment date, you will be required to repay the balance with an interest charge on top.

You can use your credit card to withdraw cash from ATM machines just like your debit card but you will be charged a handling fee of 2% or ?2 whichever is greater.

Benefits of a credit card
A credit card offers benefits if you treat it with some respect. If you take the biscuit it will with no doubt haunt you for longer than you would like it to! It is beneficial for buying if you do not have the money at that time, it then allows you to pay off the balance before the payment date or you can spread the cost of repayment over a number of months with interest.
You are provided with extra legal protection when purchasing items of the value ?100 or more under the Consumer Credit Act 0974 (section 75). It states that if you encounter any problems with the goods or services that you purchased on your credit card, the card issuer, and the retailer is liable enabling you to get a refund.

Glossary Of Terms

APR (Annual Percentage Rate) - The rate of interest the account issuer charge to outstanding balances.

Balance Transfer - Useful for transferring credit card debt to another card with a lower APR or a 0% interest for a short period. Credit card issuers attract new customers by offering 0% interest for set periods, after this time you are responsible for paying the cards typical APR on outstanding balances.

Casback - Some credit card issuers repay a percentage on everything you spend on your credit card. The usual cashback rate is between 0.5% and 1%. This is only to your benefit if you repay all outstanding balances each month, otherwise you will be losing your cashback reward through interest charges.

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