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Whenever you apply for a new credit card, there are certain items
in the small print that you should always be aware of.
Naturally, card issuers will spend far more efforts telling you
about their 'low' interest rates than they will about when higher
rates start to apply, or how much you will be charged for using
your cards abroad.
Key Credit Card Charges to Look Out For
- Foreign "loading" - up to 2.75%
every time you use your card abroad
- including internet purchases in currencies other than £
sterling. Nearly all lenders charge this fee, with Nationwide
being the only major exception. [More]
- Cash advance or withdrawal fee. If you use
your credit card to withdraw cash, you will usually be charged
a handling fee - whether you use an ATM, or go inside the bank
branch. If you withdraw cash outside the UK, you will be charged
this cash advance fee in addition to the foreign loading charge.
- NB: Foreign loading and cash advance fees usually apply
on debit cards as well as credit cards, unless you are using
your card in a UK based cash machine, or in a branch of
your own bank.
- Balance transfers
are always paid off first. Therefore, if you have a 0% APR offer,
and you have £1000 transferred, and £1000 spent
on the card, if you repay £1000, that will clear the balance
transfer, not the new purchases. You will then pay interest
at the "typical APR" rate. [More]
- Late payment fees - you will usually be charged
a fee for missing a payment. Credit card issuers also often
will share this information with credit reference agencies,
which could mean you pay even more in the long run by making
it harder to get the best credit deals.
- Over limit fees - be careful to avoid going
over the limit on your credit card, as this will also attract
charges, and affect your credit score.
- Payment protection insurance - this is usually
sold as "just 79p for every £100 owed", but
in reality, this is a very substantial additional amount. If
you keep a balance of £1000 on your card, you will pay
£7.90 this month, then £7.90 each and every month
you have the outstanding balance. This works out as a staggering
£94.80 per £1000 balance per year - or the equivalent
of paying an extra 9.48% APR! These policies are also notorious
for not paying out. Your best bet would be to arrange income
protection, or other critical
illness cover independently.
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