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As we all move inexorably towards financial meltdown, world famine, disaster, the end of civilisation as we know it and so on – I thought it might be helpful to post a bit of unsolicited financial advice for our members.
This advice applies to all those who have credit cards (Visa, Master Card & so on).
You may well have received several recent offers suggesting that you either transfer balances from other credit cards, or even borrow money, at ZERO percent interest….. yes that’s no interest charges at all. If you haven’t had them yet, you will surely receive them soon as current base rate is only 1.5 % so it won’t cost credit card providers much to do this.
These offers can be really really tempting BUT there is a hidden catch that you might not spot. (ALWAYS remember that there is no such thing as a free lunch!!!).
OK, they will tell you that you pay a ‘one off’ fee for the “loan” of 3% of its value. Fine we can all see that one. HOWEVER you must read the ‘small print’ to see what happens if you use the card for other purchases, whilst you have this interest free amount outstanding.
The gimmick is that IF you use the card to buy things AFTER you have taken the interest free loan, ALL monies that you repay will FIRST be applied to repaying the outstanding balance of the interest free loan and will only be applied to paying off any amount you owe, as a result of your normal use of the card, once the original interest free loan is repaid in full.
What this means in practice is that a few simple purchases of some small items cannot be paid off until you have settled ALL of the ‘loan’ amount.
The card’s usually high rate of interest will be charged for the small day to day items – sometimes for up to a year – and this can cost you anything from 15% – 35% or even more in interest charges for items that you wouldn’t normally pay interest on.
It’s not ‘sneaky’ …. the terms are all there if you bother to read them. Problem is that most people don’t do this and simply read the ‘headlines’ and then find themselves paying really high rates of interest when they don’t need to.
To get round this, the trick is to set aside one credit card to use for interest free loans, debt consolidation or whatever, and NOT to use it for anything else. This way you can get the benefit of an interest free unsecured loan without any ”hidden” charges.
If anybody has any comments or questions on this or other debt related subjects, I’ll do my best to answer them.
I remember a few years ago when HSBC actually deducted any money you paid from the portion of your credit card debt that received the highest interest charges. I thought that was very ethical of them – until they changed their policy.
You raise an important point here, PB. Credit cards can be beneficial and a way of saving money if you use them wisely. If you transfer a balance to a card for the 0% interest rate, do not charge any additional purchases to that card.
Credit can be a great thing, if used wisely.
Credit is the devils work !!!!!!!!!
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