Can any Nairalander (especially peeps in UK and USA) explain how credit cards work? i need information on stuff like charges that may be incurred from using credit cards to pay for transactions. Thanks

Wale

If you ask me, i would advice you to stay away from credit cards. Instead use a Line of credit with your bank. In most cases it is cheaper and builds a relationship between you and your financial institution. But credit cards work just like a short term loan. You have a grace period to pay it off or you have to pay finance charges and sometimes some of these cards come with annual maintenance fees. But if you get only always make more than the minimum payment.

Walelead,

A credit card is a line of credit, you apply to a bank or credit card company and they provide you with say £10,000 worth of credit that you access via the card. So if you pay for good or services with the card up to the amount of £2,000 then your balance is £2,000 and thats what you pay monthly interest on. The rate can be anywhere from 7% to 25% this is dependent on your credit rating.

When you use your credit card to pay for a transaction online or otherwise, there is no charge to you. It is the merchant who pays a small percentage fee which enables him/her to accept that form of payment but of course he has already factored that into the price he is charging you for the goods or service.

In my opinion, I think credit cards can be quite useful only if you are disciplined (I know people personally who have started successful business's on credit card borrowings) and not inclined to go on shopping spree's but then how many of us are like that?

Hope this has helped.

Rgds

They have started again o.

Akolawole:

They have started again o.

@AKOLAWOLE !

Where exactly r you based ? I honestly do not think you LIVE in Nigeria, u know so much about the U.K system ,--- but i'd suggest you help WALELEAD out on this, and not pick on  'LOOPHOLES' 

@Beyounce1

I have learnt a lot on this forum but i am getting tired of some things.


We are still batlling with the other guy at career.

I have sent you an E-mail.

@WaleLead

Are you a resident in UK?


@Cream2 & Walelead

Credit card company can NEVER give you credit limit of £10k like that. You must be homeowner before they could give you that straightaway. Though you can build on your financial dealings with them up to that amount.

But i will advise you to stay away from Cards. i am begging you.

CREDIT CARDS
What you should know before applying for a card

Credit cards let you choose how much you borrow (subject to an upper limit) and how quickly or slowly you pay back the loan.

Compared with most other types of borrowing, credit cards are very convenient. Once you have a card, you simply use it to pay for goods and services without having to request a new loan each time.

Credit cards are issued by banks, though lots of other organisations - for example, newspaper groups and motoring associations - have teamed up with a bank to offer their readers or members an own-brand credit card. The complicated system of making sure credit card payments all reach the right destination is handled by specialist organisations such as Visa and Mastercard.

Charges
Each month, you receive a statement setting out what you have borrowed using your credit card - this is made up of your purchases made during the last month using the card, any balance carried forward from the previous month and any interest charged.

If you pay off the whole amount you owe, usually there is no interest charge. So, provided you pay off the full balance every month, credit cards give you interest-free credit for, say, a maximum of 56 days.

If you do not pay off the full amount, you are charged interest on the whole lot. Different cards work in different ways, so interest might be charged from the statement date or from the date of each purchase.

Each month, you must pay off at least a minimum amount - for example, £5 or 3% of the balance, whichever is greater. If you miss a payment, there may be a penalty charge.

A few cards charge an annual fee - say, £10.

What a credit card company charges you for the use of its card can be expressed as an 'Annual Percentage Rate' or APR. An APR takes into account:-

the interest you must pay;
any annual fee you must pay;
when and how often you pay the interest and any fee.
You do not need to know how to work out an APR. The important thing is that APRs show the cost of borrowing on a standard basis so you can compare one APR with another.

The APR also lets you compare the cost of credit cards with other types of borrowing. Of course a loan with a lower APR is cheaper than a loan witha higher APR.

The APR does not take into account charges you might have to pay, such as a charge for missing your monthly repayment.

To lure customers away from competitors, many card issuers offer special, low introductory interest rates - for example, 1% a year for the first six months, or even 0%.

Check the small print of these offers carefully. Often, it applies only to any balance you transfer from another card, not any new purchases you make. And, your repayments are set first against the transferred balance, not against new purchases, so you might not get the benefit of the offer for the full six months.

Repayments

If you pay only the minimum amount each month, it can take a very long time to pay off a credit card bill.

For example, suppose:

you have a debt of £1,000;

interest is charged at 18% a year; and

you pay off a minimum 3% (or £5 if greater) of the outstanding balance each month.

It would take you 13 years to pay off the whole balance and your repayments would total £1,772.

Although credit cards can be a convenient and cheap way to borrow for a short period as they usually have a period of free credit (25 to 50 days), they are an expensive way to borrow over the long-term.

Small print (VERY IMPORTANT @ WALELEAD ) 

Credit cards come with a lot a small print. Particular areas to check are:-

What is the period of free credit?
From when is interest charged - the statement date or the date of purchase?
Will you be charged if you miss a monthly payment? How much?
Is there an annual fee?
What happens if you can't keep up even the minimum payment?
Risk

The biggest risk with credit cards is running up debts you can't afford to repay. Making only minimum payments each month is an extremely expensive way to borrow. If you don't keep up at least the minimum payments, the issuer can demand that you pay off the whole outstanding balance immediately. If you can't do this, the issuer could take you to court. The court would probably order you to make regular repayments based on what you can afford or could allow the lender to seize and sell some of your possessions to recover the debt. You are likely to find it hard to get another loan or credit card if you have a court order against you.

If you find yourself experiencing difficulties paying your credit card bill speak to your credit card company. Do not put this off. Credit card companies do not want you to default on your repayments and will be prepared to talk to you about how to solve any repayment problems you have.


----- and THE DECISION IS YOURS --------

BEST OF LUCK !! 

I have sent you an E-mail. @WaleLead Are you a resident  in UK?

@Akolawole, i did not recieve your E-mail, and yes i am resident in UK, North London precisely.

Thanks a million Beyonce1, uve really hit the nail on the head.I have two Debit cards (HSBC and NATWEST) and i pay for all transactions with them, but credit cards seem to be more popular these days and i thought i'd get myself one.

Walelead

Akolawole is right, please stay away from them cards. Popularity in this case is not a good thing. I think you need to pay from what you have in your account. End of story.

what about withdrawing money from cash points? I am referring to Bank cash points not off-licence fee paying ones. I think you pay for every cash withdrawal right?

Walelead WTF?? what  are you talking about Debit what ?? Debit card is your own money, you have no charges unless you use your PIN in making transactions, but credit card is GBESE ,  I get dozens of offers week in week out, tempting offers i must confess. some are kind of of NO interest( Yeah)!!. but its still GBESE.(Debt)

Hmm, Credit cards could be helpful if you gat a steady job in the healthcare world here. I have a familyfrend, he's a nurse, the guy took like 4 credit cards, built house in naija, stocked his house like crap, came back to yankie. Right now the guy dey Fa- ise( excess work) and giving himself undue pressure before the credit cards company hooks his throat, thats the evil of credit cards!!!

Walelad, just run away from borrowed life, it could be tempting, i know people that keep their credit cards and promise never to unleash it, but if their paycheck sucks by 1cent, they unleash it again.

Inshort credit card is messed up, but let me confess, its a necessary evil, Imo still get it later!!

In short credit card is messed up, but let me confess, its a necessary evil, Imo still get it later!!

@ rikkyjen, This is the main reason why i asked this question. I have always seen credit cards as evil but am suprised that people still take up to 3,4 cards.It is also said that we live in a credit economy and credit cards are a necessity.
So how can one avoid this?

@ Walelead,

Don't mind these bunch of hypocrites(especially Akolawole).
U need to read the thread on HSMP Visa at career section and see how's he been making syntax errors about facts in the UK.

There's really nothing senseless in applying for credit cards.
The only snag about this is your self-control and ur ability to resist a crazy shopping spree.

Credit cards will actually increase your credit score as long as u keep up with your payments.
There's a reason for the idea and its EMERGENCY.

How many of these lots condemning credit cards will help u out in times of need?
None of them i guess.

So i will implore u to ask first yourself if u can resist the temptation to spend lavishly. Once u can pass this test, go for it.
I will recommend American Express cards(AmEx) because u cannot withdraw cash from the ATM with it so it will work to your advantage.
Cheers.

If your d type that can't control yourself and what you buy, you should stay away from credit cards!!!
get it  (it comes in handy) but stay away and resist temptations from using it often.
It gets you in big time debt!!!
Imagine being in debt for the rest of your life and some to pass to your kids. jst kiddin'

but seriously. . .  credit cards are evil (a necessary evil),  . .

@reyes4eva, what bunch of hypocrites? we're telling the truth lol the card's the devil!

Where exactly r you based ? I honestly do not think you LIVE in Nigeria, u know so much about the U.K system

i think Beyonce 1 is right, no offence Akolawole but i have read a few of your comments and it seems ur not just in the UK temporarily but are a well informed resident. I even noted you directing someone to www.house.co.uk, thats a new website that British Gas set up for people to compare thier bills. Its time to update ur profile oh.

Yeah, yeah, stay away from driving on the highway because people die in car crashes, do not use the internet because of child predators and identity theft and it goes on.

Life is all about taking calculated risks, you just need to have self control and know your limit.  Just make sure you pay off whatever you spent within the period your card stipulates (usually between10-30 days on most cards)and you do not pay any charges( of course you get a card with no annual fee).

But make sure you don't use it at an ATM to withdraw cash b'because u instantly pay interest with that transaction.

If you manage ure card well it will help build your credit (FICO) score and you can use it in situations in which you can only carry out a transaction with a credit card, e.g rent a car, u-haul truck to move etc.

Infact you can make some money off a credit card, by simply passing most of your bills to a card that gives reward points and have an automated deposit from your checking account to fund the card, at the end of each year you make about a 100 bucks that you can claim in groceries, gas etc. depending on how much bills you had to pay.

If you are not disciplined and flash your card everywhere it will be your doom.

@ Walelead,

Akolawole is a frequent visitor in the UK although he is a born pessimist.
Don't listen to his advice if u want to enjoy your stay in the UK because he's one of the types that believe staying in Nigeria is better than living in the UK.

Like my man Reyes has told u, Self-control is the key to credit cards.
Spend wisely and AmEx is your best bet as u can accumulate points that lets u fly anywhere without buying air tickets.
It also restricts stupid spending as it is not ATM-friendly.

Go shorty, it's your berfday

Jackal:

@ Walelead,

Akolawole is a frequent visitor in the Uk although he is a born pessimist.
Don't listen to his advice if u want to enjoy your stay in the UK because he's one of the types that believe staying in Nigeria is better than living in the UK.

i wont describe myself as a pessimist but i do think staying in Nigeria is better than UK, but that is a matter for another thread. U could start it u know.

So u reckon staying in Nigeria is better than UK?
I felt like that sometime ago but my visit last christmas told me the simple truth.

When was the last time u visited Nigeria?
6 years ago i guess.

No need to argue.
U can go back to Nigeria for just 3 weeks and lets see how u cope with the hardship.

Jackal:

So u reckon staying in Nigeria is better than UK? When was the last time u visited Nigeria?
6 years ago i guess.

No need to argue.
U can go back to Nigeria for just 3 weeks and lets see how u cope with the hardship.

i was in Abuja just about 2 years but its been about 6 yrs since i checked Lagos. i still chat to my peeps out there and i think theyre faring well. At least they can chill out, relax and drive around. i cant drive here without paying congestion charge (£ every day, parking meters, parking tickets , Tv license etc. i cant take a break  from work or else bills will kill me. U can see i am considering credit cards. Doesnt it sound like im having small money issues?
@Jackal, maybe America is a better place  but UK is so not? my Sister is on holiday in Nigeria and is actually due back today, maybe she will tell me more.
Anyway abeg how i fit get green card so i go fit relocate? (joking )

Wale

U have problems paying your bills and you want to tag on a credit card? You are in for a rude awakening. I disagree that Nigeria is better and i know that Akolawole is the pessimistic but on this he is right.

Akolawole,
To be honest,you only succeded in making a goofy contribution.And i think its wise to stay off discussions if one does not have any idea on the topic.i see no reason when you shoul query cream 2 who made a compedious and accurate explanation of how a credit card works.The two points tou highlighted were wrong.One,i have a friend who is not a homeowner but has a credit limit of 11000.Two,i have been using credit cards 4 more than 5 years so i know they dont charge u when u use them to pay for goods.besides,cream2 only used 10000 as an hypothetical example.He said"say 10000, " May be the problem with some people is english!well done Beyonce1 for your explanation.You must be a banker!
The key thing about credit cards is discipline.If u are not,pls dont go near it!

i know i aint the originator of this thread but i sure av learnt a lot of things. props 2 evry1. beyonce, am jealous of u oo, u knw so much.

neways av neva had a credit card, hell av neva worked, but one thing i knw for sure n this i learnt from my dad goin hysterical anytime his statements arrive, AVOID THEM. they look tempting yea sure but only use them as a last resort n even if u use them as that, it might not help ur situation cus it can add more 2 ur gbese.

walelead, abeg stick 2 ur debit cards. if u avin money problems, ur lifestyle's probably more expensive than ur earnings. so in essence, STICK 2 UR DEBIT CARDS. dts wat i think!!

3 things make a high credit score when talking about revolving debt

1. Length of time you have had your Credit Cards
2. Your TOTAL line of credit
3. Debt to Credit Limit Ratio

Having cards 2+ years of continous ON TIME payments increases your score, a higher credit line like 20000 or 30000 increases your score, and using up less than 30% of your credit line increases your score. The reverse all hurt your score individually and collectivelly. Those are the important aspects to maintaining a high score. How credit cards work was esquisitelly explained by beyonce, tie that in with the 3 pointers I just gave and you should be able to get and maintain a 720+ credit score

Ofcourse credit cards, much like the monetary policies of the WTO and IMF are all scams, and ways to keep the Plutocracy rich

Beyonce, that was so good I found it

http://www.gov.im/oft/consumers/Personal_Finance_Borrowing/credit_cards.xml



@bankymi leave akolawole alone o, he knows it all

Shango

The guy is in the UK not US, i am sure they score credit ratings differently over there.

Wale

I had credit cards worth more than $50,000 In 2001/02. I went as far as to put my cards (Amex,Discover MC and Visa) In the freezer, so i would use it" for emergencies only". I realized that when you have Credit cards, you all of a sudden have more emergencies. I am currently debt free and i do not miss any of them. I want to particularly tell you to avoid Amex, when you do not pay it off after the grace period, your finance charges changes. And plus you have to pay at least $79.99 a year just to own one. And they are always increasing your limits even when you do not ask for it.

@ Bankymi.

Akolawole is just one of those lads who thinks he knws everything but he does not know jack.
He believes everything by the book and he does not know there are ways to go about a lot of things.

I know enough non-home owners who's got humungous credit card limits in the UK.
A friend of mine(Nigerian) works as an expartriate for Halliburton in south-east asia and his AmEx card is "no limit".
There's nuthing on the face of this earth one cannot buy with a no-limit credit card.
The only snag to stuffs like this is DISCIPLINE and steady repayment schemes like a standing order/direct debit.

This lad is not a home owner but the company he works for was able to arrange a "no limit" American Express cards for all their staff working as expartriates abroad in case of EMERGENCY.
Some novices enjoy to display their ignorances on public forums to mis-inform other people.


@ T2,
U must work for FBI or  24's CTU(Jack Bauer + Chloe O'Brian + Edgar Stiles) to have caught beyonce1 just like that.
This is copy n paste at its best and i think we need to start clamping down on plagiarism on this forum

Are u a professor or do u have a franchise at www.turnitin.com?
I'm quite impressed on your research because this a clear cut example of "caught in the act RED-HANDED"

Well, Nigerians are lazy, rather than do an honest research and write or speak authoritatively they prefer to copy and paste someone else's work without even referencing the originator.

Eve accolades were thrown at the writer yet he/she could not point out he lifted the stuff from somewhere.

Just like cram work, we have a lot of educated Nigerians that know next to nothing about what they were taught in school.

Jackal,
Yes,people like Akolawole like making monkeys of themselves.I hope he has read your own informed contribution.We are on this forum to learn and exchange ideas But that is not a mandate for any Tom,Dick and Harry to open their mouth and say jargons.Some people can be misinformed or disinformed by this handful of loudmouths.
And,i dont think we shld take Beyonce to the cleaners just because of this.Although i agree that she made a big error by not quoting her source.But atleast it was very educative.

@ Akolawole

Take your time to read posts properly and crucially "think" about what was written.

Don't come hard on Akolawole.

He is a JJC in the land.
Most things he writes here are beer-parlor/pub gists or things one of his mates must have told him in the past.

He will learn in due time to button up his lips on things he does not know about.