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Don't get in a tangle over credit cards, follow this guide to a stress-free application

If you've never applied for a credit card, the whole process can seem quite daunting. And with so many companies offering different deals, there are lots of things to consider.

Some entice customers with reward deals, while others offer interest free rates for an introductory period. The truth is, there's no one single card that tops the list!

The trick is to work out exactly what you want the card for, and then decide which option suits your needs best.

So if you're a credit card novice, don't run away and hide. Simply follow our six easy steps for a stress-free application.

Step 1 - The credit check

Everyone applying for a credit card must first undergo a credit check. Your acceptance and the amount you're allowed to borrow depends on this.

Be honest when you fill out a credit card application form. Restrictions are in place for your own good. You also risk being charged with defrauding the credit card company if you give false information.

If you're unsuccessful, consider applying for a secured credit card. Here, you make a deposit against the credit limit of the account. The bank then holds onto it, just in case you don't make your payments as agreed.

If you're worried about your financial history, you can always try Confused.com's credit rating service. And if that still doesn't give you the result you want, this article may be of help.

Step 2 - What is APR?

APR stands for Annual Percentage Rate. It takes into account the interest rate on any money borrowed along with any mandatory fees and charges. It does not include charges such as late payments.

Generally speaking, the lower the APR - the less interest you will pay.

Step 3 - Who can apply?

 

Standard credit cards are available to anyone over 18, subject to a credit check.

Premium cards (Gold, Black and Platinum) usually offer higher credit limits and lower interest rates, but are generally offered to people with higher income and better credit risk.

 

Step 4 - What card to go for?

Find the best card to suit your requirement by following these guidelines:

A) You intend to use the card to make purchases, which you intend to pay off in full each month.

In this case the APR is of less concern as you'll be making repayments within the interest-free period. Perhaps opt for a card with decent fringe benefits - such as cash back offers, rewards or loyalty points.

 

B) You intend to use the card for a major purchase, spreading payments over several months.

 

Think about a card with a low APR. Does this change over a period of months? Some cards will offer a lower - or even 0% - introductory rate, but this will often rise dramatically. If you're clever and ruthlessly organised, you could consider juggling payments between different credit cards. But be warned: if you don't have the time, you could come unstuck and end up with a whopping bill down the line.

 

C) You intend to use the card abroad or only in an emergency.

Go for a lower credit limit and no annual fee. Choose a card that is accepted in most foreign locations. Look at the fees and transactions in foreign currencies.

D) You want to support a particular charity of organisation.

Charity cards will donate a sum for every purchase made at no additional cost to you.

 

Step 5 - The pros and cons

 

Credit cards are often demonised as a one-way ticket to spiralling debt. But used sensibly they can be a great means of securing free, short-term credit and making money work for you.

They're also a much safer way of making purchases - particularly over the internet, by telephone and mail order. If you buy something that costs more than £100 and less than £30,000, you gain a valuable legal protection under Section 75 of the Consumer Credit Act. Additionally, if you're a victim of credit fraud you probably won't be expected to pay.

 

Step 6 - Avoid debt

Credit cards are as much about responsible borrowing as they are about responsible lending.

It's important to bear in mind that different interest rates apply to different means of borrowing. Generally speaking, cash withdrawals on a credit card will incur a higher interest rate, and the interest-free payback period does not apply. You will be charged interest instantly.

Unless you keep control on your spending, you could end up in financial difficulties. High interest rates and late payments could make the situation even worse.

So if you do intend on borrowing money for a longer period of time, it might be more cost effective to choose a loan.

 

 

 

 

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