Card confusion
Question
I keep getting letters offering me what look like good deals on credit cards. I've never had one and people keep telling me they're a bad idea, but I really could do with the extra cash. Should I get one or should I steer clear?
Answer
Credit cards are neither good nor bad because it depends on you, the user, as to whether they're a positive aid to your life or become a problem. They can be very useful when you want to buy something and don't have the cash on you, or you want the added protection they offer if the goods are faulty. However, balanced against the positives are the negatives of the high interest rates they charge when you don't pay off the credit in full at the end of every month. Even if you can't pay off the whole debt, you are expected to make a minimum payment every month. You will be charged penalty fees if your payment is late or if you go over your credit limit. Some credit card companies might also charge you a yearly or monthly fee just for having the card.
The area where you need to take real care is when you use your credit card to withdraw cash because some cards charge interest - again at very high rates - from the moment you take the money out. So if you don't, or can't, keep on top of your payments, it is easy for the debt to get out of control very quickly.
The Financial Services Authority (FSA) can give advice on what to watch out for.
If you are looking to borrow some extra cash to make a special purchase you might want to consider borrowing from a bank or building society, but remember to shop around and see what the best deals are. Or you might want to consider using a credit union to borrow money. These are small cooperative organisations that run in many parts of the country.
Updated: 23/02/2010
Question answered by CAB
