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Page 6: Credit Cards.

Fancy getting £40 in six months time?

Please read on.

Credit Cards are dangerous things. They are too easy to get, even easier to use and hard to pay off. Our recommendation is to avoid them at all costs. The only card worth getting from a bank or building society is a Debit Card that links directly to your current account.

Please read on.

However, we have methods that have been used to reverse the predatory way that some credit card companies promote their shiny plastic. We call it Credit Card Profit Making and we recommend only the very highly disciplined should try it. The rewards are limited but represent the ATTITUDE of Money Surgery in that every penny saved and every penny earned is priceless in the fight against debt. And when you pull it off AT THE EXPENSE of an industry that is rich on the back of an "I don't know or care what they charge me" public attitude, it makes the profit very sweet indeed.

Please read on.

It sounds simple really but you need a head for arithmetic, long term memory and personal organisation.

  • Pick a card. Any card? No, actually a credit card that has a very very low lending rate. 2.9% would be nice. Make sure that you can use nearly all the available balance on the card either by "Paying off other loans" or, the best way, "By writing credit card cheques". Check that the rate is "Introductory". It nearly always is. Then check for how long this low rate is to run for and circle that "End" date in every diary you can find. Don't forget it!
  • Next, apply for that card. Then shop around for the best home for your stash, or decide which outstanding debt would you prefer to pay off in part. Check out the savings accounts rates on our news page or work out which loan is charging you the most. (Be careful with paying off loans because the credit card money MUST be paid back just before the introductory rate expires. So check that you are able to borrow back that original loan. Perhaps an existing agreed overdraft that you have would be the best because the loan is pre-arranged)
  • Here's where you use your calculator: Assume that they allow £3,000 limit. Divide this by 2.9, or whatever the credit card rate is, then multiply by the net savings rate. Multiply by the amount, in years, of the introductory rate. Thats the profit you will get.
  • Once you get the application approved you must remember to always act as quickly as you can and write that credit card cheque or pay off part of that loan up to within a month-and-a-halfs interest of your limit. That way, you won't go over the limit when the next statement comes in with interest charged. Get that into your "Stash" account PDQ, either by 1st class post or by hand, if you are not using the money to pay off part of a loan.
  • Always pay off the minimum amount each month until the introductory rate expires. Then, working back from the "End" date, allow 10 days for your final big cheque to reach the credit card company, allow 10 further days for the high interest savings money to be withdrawn and get credited to your current account, if it wasn't there anyway. Never miss a monthly payment to the card company. Never borrow more than your credit limit. Be absolutely sure that you'll never use the credit card to get into (further) debt. Be absolutely sure that you can pay off the card when the introductory rate expires.

That's it! The profit on a typical £3,000 might only be £40 over six months but its money for nothing IF you are DISCIPLINED and careful. Money Surgery wouldn't recommend this generally for people who have debts but it has been done successfully by some former patients who have no debts.

Please read on.

Just a Thought on... 0% Credit Card Transfer Charges

(11:00 Saturday 16th July 2005)

Transfer your credit card debt to a card that's offering 0% interest on balance transfers, for 6, 9 or 12 months, and these days about half the card companies will charge you typically 2% of the amount transferred.

This is effectively a 2% introductory rate, NOT 0%, and we feel that it's our duty, here at the Surgery, to tell as many potential card users as possible, to counterbalance the disingenuous tactics of their card marketing.

If your bank offers a headline nought-percent balance transfer credit card with a small print two-percent transfer charge, how many other small print charges have you failed to spot on their other products?

Just a thought.

The Kindest Cut

(19:00 Tuesday 24th May 2005 news story)

We gather that April saw us actually repay more credit card debt than we took on, for the first time in ages. Maybe it's a change for the best, given the increase in card charging for balance transfers and the reluctance of card issuers to offer 0 percent credit. So if you can pay off the card balance and you haven't got a 0% credit card, this could be the best thing you could do. Then take pleasure in slowly cutting-up that plastic.

Which reminds me, did you know that we won the war on the back of the "Paper, Scissors, Stone" game? Churchill chose scissors, hence his famous two-fingered salute which everyone mistook for "V for victory", while Hitler plumped for paper, as seen in his flat-handed salute. True story.

Good luck to Liverpool FC tomorrow, going for European Cup number five.

More Banksploitation: Holiday Card Charges

(16:00 Saturday 23rd April 2005 news story)

WARNING: If you were thinking of using your debit card to make purchases abroad, remember that your bank will charge you about a pound transaction fee on every purchase. And guess what? - Nationwide Building Society doesn't, not even through using its credit cards.

Latest to start charging their loyal customers is the well-groomed Lloyds-TSB, charging £1 for any purchase made in a foreign currency, and appallingly applies also to Internet purchases and home shopping in foreign currencies, so you don't even have to leave your home to get stung.

A major reason why customers stay with these bankers are their half-truth reasons for implementing a new charge. This time Lloyds-TSB say, "We are introducing the fee to cover the cost of anti-fraud measures to protect card users". That's an excellent excuse, isn't it, like saying 1. There is a genuine reason, 2.It is in order to protect you the customer, 3.If everyone else isn't charging then they are more susceptible to fraudulent acts. Brilliant, really.

Other leading lights in cutting-edge banksploitation are HBOS (£1.50), and NatWest (75p), however Barclays, HSBC and First Direct don't yet charge a fee.

On top of all this, most banks also charge a transaction fee of up to 2.75% of the purchase price when debit cards are used for foreign currency purchases. Withdrawing cash from ATMs abroad will always incur a charge too, with Lloyds-TSB raising its minimum fee from £1.50 to £2 from 20th May.

Some Patients say to us here at the Surgery that they are quite happy with their bank. "Why does Money Surgery say that banks are bad?" That's why the banks make so much profit: Inertia and Ignorance. The "Two I's". Use your two "eyes" and compare banks against building societies. And, if you have debts, stay home where it's safe.

Cut out Holidays, Cut out Banks, like a Surgeon.

Election thought for the day: In the party of the blind (BNP), the one eyed man is king.

No More Rate Tarts.

(21:00 Sunday 10th April 2005 news story)

Balance transfers on 0% credit cards may become a thing of the past as more and more card issuers are charging the cardholder to transfer a balance. Switching large balances from card to card means that savvy cardholders need never pay off the balance and instead put the spare cash in a savings account, as we've championed here. This follows-on from news of some rather nasty cards as in our article of February 15th, No More Card Tricks, here

The card issuers have become wise to the actions of what Anne Ashworth of the Times Money section called "Rate Tarts". This term describes people who exploit the incentives of card issuers to transfer their credit card balance to one that charges no interest for a limited period, then apply for another card and transfer this balance again, perpetually, while earning a good rate of interest on the money they would have paid off the balance with in the first place. The card issuers have previously made enough profit from the people who were tempted by the incentive, as is the card issuers' intention, and subsequently got stung when the 0% period expired, or they used the card for purchases and got sucked into the debt whirlpool. Back then, the activities of these clued-up "rate tarts" weren't an issue, but now an increasing number of people, like many of our Patients at Money Surgery, are profiteering from the card issuers' profiteering and the card issuers are seeking to stop it. This is a shame: It was like a mouse running off with the cheese while the trap is still cocked.

According to Moneyfacts, one of our favourite web sites despite being sponsored with those horrible pop-up ads, most lenders that offer 0% card deals are now charging a fee of 2% of the balance being transferred. Mint was the first to start "Tart" charging, that's the last time they get nominated in our MoneyOscars, with 2% (Minimum £5, Maximum £40). Then there's:
Barclaycard - 2%, £5 min., £50 max.,
Alliance and Leicester - 2%, £2 min., £35 max.,
Tesco Personal Finance - 2%, £2 min., £35 max.,
MBNA - 2%, £2 min., £50 max.,
Halifax is expected to be next.

Maybe the focus should be on paying off these balances: the days of the perpetual interest-free balance transfers are numbered. We'll keep tabs on the remaining card issuers to see if they all follow suit, and we'll highlight who the good guys are in terms of 0% cards. We've also noticed that remortgagers are having similar terms imposed on their home loan transfers, Leeds and Holbeck building society is the latest to increase its exit penalty for transfers to rival lenders, by a whopping 75%. This comes after increases by Co-operative Bank, Nationwide Building Society and Alliance and Leicester in the past year. When the Co-operative Bank raised its exit penalty from £85 to £195 in February, one Patient likened it to parking in a car park, with clearly listed charges, only for the charges to increase once you've parked your car, without any warning. We've also noticed that new mortgage deals all seem to have an upfront fee that has a serious effect, particularly on lower loan values.

They've become wise to us "Rate Tarts" but all this means is that there is greater emphasis on cutting-up credit cards and simply paying-off every single debt.
Cut-out credit cards and mortgage loans a Surgeon.

No More Card Tricks

(Tuesday 15th February 2005 news story)

A credit card which charges up to 69.5% interest, is being targetted at those with poor credit histories. The Vanquis card, backed by doorstep lender Friend's Provident has been dubbed "a national disgrace" by Damon Gibbons of Debt on our Doorstep, who are a campaign group intent on forcing the government to cap credit card interest rates at 30%.

Provident argues that it gives access to credit cards to those who may otherwise be unable to get one, and says that charges are high due to the low credit limits offered, which start from just £150. The cards also come with an annual fee of £19 and users can opt for no extra charges on late payments or breaching credit limits, in return for a higher annualised percentage rate (APR). These interest rates are reviewed each year for each customer, depending on if the customer has proved themselves a good credit risk.

Regarding the Vanquis card, the Consumer Credit Counselling Service said that they encourage anyone to pay their credit card bill at the earliest opportunity, whatever the APR, and reminds us that if the cardholder pays of the balance in full each month, they won't pay any interest. However, they do suggest approaching mainstream lenders initially.

At Money Surgery, we devote a whole page to Credit Card Profit-Making, which is basically a card trick that earns some modest pocket money, but we also often warn our Patients that credit cards are dangerous things. It is so easy to rack up the bill on the credit card and sometimes you can't pay it all off in a month. Next month, you're paying interest for the first time, and before too long you're up to your credit limit. Play with cards, play with fire. Even the card that sits paid-off in your pocket can so easily be used again. We can borrow money and put it into a high-interest account for a short while and earn a few pounds, but maybe we are better off doing something ...else. Transferring your balance to a card that offers 0% for a short time, is sensible, for those of us who are creditworthy enough to be given the choice, but even then, the cardholder must exercise considerable discipline not to increase their balance or to forget about the expiry period of the deal.

It's not just casinos that deal cards that can hurt.
Cut up the cards, cut out your debts. a Surgeon.

Naughty Barclaycard

(Wednesday 19th November 2003 news story)

It gets worse for Barclaycard. Barclays chief executive, Matt Barrett, is only just getting over the embarrassment last month of admitting to MPs that he didn't borrow on credit cards because they were too expensive when Barclaycard gets slapped wrists from the Office of Fair Trading.

Yesterday, the OFT forced the company to withdraw its promotional literature for their '0% Forever' credit card saying that their advertisements are highly misleading and even illegal.

The credit card offers 0% interest on balance transfers for life except that customers are required to spend at least £50 a month on new purchases for which they get charged at the standard rate typically 14.9%. If they don't comply they get charged 6.9% on the transferred balance. The OFT says that 6.9% - ie: the rate not contingent on purchases - is the rate they should be quoting for the transferred balance and that Barclaycard has breached the terms of 1974 Consumer Credit Act.

As John Vickers, the OFT chairman pointed out: "'Barclaycard promoted this product as offering the opportunity to borrow at 0% interest for ever. It does no such thing. The promotion in these terms has therefore been stopped. Barclaycard owes it to the public to set the record straight."

Barclaycard doesn't accept the OFT's ruling but has agreed to withdraw the advertisements and to write to all the customers who took up the offer spelling out what the terms of the agreement really are.

Money Surgery comments that people must read the small print. We have few patients that unquestioningly trust the Big Four banks, but many that have genuine 0% interest credit cards. Look through our Latest Rates section for these debt busting beauties.

People are Still Spending!

(Thursday 25th October 2001 news story)

Mortgage lending fell sharply last month, but shoppers are still spending, according to Britain's major banks. While gross mortgage lending was down 17% to £9.78bn from August to September, total net consumer credit rose by a whopping 666m over and above the 839m total of the month before. In September last year, the total was less than half what it was this year. Peter Vipond, head of research and statistics at the British Bankers' Association, said, "At a time when everyone is talking about doom and gloom, it is clear that people are still confident enough to borrow more and spend on nice things like cars and house extensions."

At the Surgery, we are pleased to see that consumer confidence hasn't been shaken by recent events, being as it has a major influence on the economy as a whole. The flip side is that not only are we still prepared to spend but to borrow to spend, perhaps in the comforting knowledge that our homes are increasing in value and our jobs are secure. Many of us have loans, overdrafts and credit card balances and many new accounts will be opened in the run up to Christmas. If you are considering borrowing, check what the interest rate is on EVERY card, loan and overdraft that catches your eye. Some charge over 20%, while others offer 6 months interest free. We show a selection of excellent rates for Credit Card Balance Transfers and Personal Loans, here. Be careful and remember that YOU are in control; its YOUR debt, YOUR money. Use these low interest deals to REDUCE your loan...according to our Chief Surgeon, "The best credit card is the one cut up by scissors!."

The flip side of these cheap credit card financial friends are these Credit Card financial foes:
Avoid at all costs!

Dog Credit Cards

Company:Product:APR:Intro Rate:Cash Back:Annual Fee:
Capital OneClassic M'C24.2%NoNo£18
Airdrie Savings BankVisa21.1%NoNo£10
HFC BankM'C/Visa19.9%NoNoNone

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Saving Money: Switched on ways to keep hold of your precious cash.
Getting Money: Clever, barely legal ways of getting money.
How a house, open a bank account...
Future Dreams: Planning, after your debts have been eliminated.
Financial X-Ray: Let the nice doctors at Money Surgery X-ray your wallet.
Money News: The latest from the world of personal finance.
The best interest rates for saving and borrowing.
Feedback: Write to the Surgery.
Contacts: Other people who may be able to help, if we can't.
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