Consumer Credit Section
A personal finance section with information about consumer credit
from Debit Cards and Store Cards to Credit Facilities and Debt
Consolidation.
Do you have outstanding debt on a credit card? After that must have gadget in the shops but don't have the money
to pay for it? You could use the stores own loyalty card or even
use their credit facilities, but is that the most economic way?
Then The Grabber is here to help
you manage your credit.
Topics covered on this page are:
Credit Debt |
What is Consumer Credit |
Debit Cards | Credit
Cards | Store Cards |
Loyalty Cards |
Credit Facilities |
Consolidation | Consumer Credit
Jargon Buster - term index
If you have outstanding debt on some form of consumer credit,
you may be paying more than you need to. The rates charged on
plastic cards and for credit facilities could be higher than if
you had a personal loan.
Have you noticed that paying the minimum payment on your
plastic's debts pays that months interest but barely touches the
outstanding balance. Continuing to manage your debt that way
will never clear you from that plastic burden.
Using a stores credit facilities to make a purchase might cost
more overall than arranging a loan with which buy with. No deal
you need to use credit facilities to buy with is that good. The
rates you might be charged for the policy could easily swallow
up any savings you think you've made.
A personal loan would charge you rates and interest based on
your individual circumstance. You could find out the cost of
that item you're after, leave and then arrange a personal loan,
and then when you have the finance return and make the purchase.
It could save you hundreds or thousands on the items overall cost.
Consumer credit is a line of credit products used for personal
or household purchases. Consumer credit comes in the form of two
basic types, plastic cards and credit agreements. Essentially
they allow you to spend up to a pre agreed amount on which you
will be charged interest as well as fees for administration.
Plastic cards allow you to borrow money to buy things straight
away, you may not otherwise be able to afford, and then repay
the used credit over a period of time. How long a term you
choose to repay over is up to you, however you will pay more the
longer you take.
A credit agreement or facility is when an establishment,
business or shop has a pre-arranged line of credit policies from
a lender. When a customer is unable or unwilling to pay for an
item they could apply for the policy with which to finance the
purchase. There is a credit check to decide suitability prior to
agreement but rates charged and repayment terms are pre-set.
Debit cards take money directly from the holders bank account.
Debit cards are not credit cards but are an alternative to cash
or writing a cheque. Linked to your bank account, debit cards
often also work in cash machines and as a cheque guarantee card.
When using a debit card for a purchase money will be shown
withdrawn from your account in a few days.
Switch and Visa
operate these schemes for the banks. Generally using these cards
do not cost extra as they come with your account although this
could be dependant on you remaining in credit.
Credit cards are a finance product that is used to access
credit, of which the amount available is pre-arranged. Credit
cards are a plastic card from a particular issuer for purchasing
goods and services against a line of credit. Depending on the
type of card carried holders can use them to withdraw cash
although there are charges for doing so.
Each month you can either pay back the full amount used or some
of this amount. Normally you must pay a minimum amount each
month and you will be charged interest on the outstanding
balance. When applying for or choosing a credit card to carry
remember to compare the APRs. Usually the lower the APR on a
credit card the less you pay in interest.
Credit cards are a simple, easy to use form of credit we all
carry. They may not be the most cost effective form of finance,
but they are great for those impulse buys or as a way to
purchase some thing now and pay for it later. However credit
card issuers charge interest on the credit used and that
interest is at a higher rate than any loan the holder may apply
for.
A store card is essentially a line of credit holders can apply
for but which can only be used in a single shop or chain of
stores. The store card comes with pre-set interest rates and
stringent terms and conditions. There may be credit checks on
holders but these are usually used to set the level of credit
the holder can draw on, and not their suitability.
The store
card does not allow the holder to draw cash they can only be
used to fund purchases. Like credit cards you will be sent a
monthly bill which you can settle in full or decide to pay the
monthly amount only. APR's and interest rates are usually higher
than other plastic with sharp penalty charges for any defaults
or late payments.
A store card may provide savings on items in
store but these savings will quickly be swallowed up by interest
charged if balances aren't repaid in full. Some consider store
cards to be advertising gimmicks, they offer cash off purchases
and a line of credit, but the rates they charge are just too
high.
Loyalty cards are a plastic card that rewards its holders
for shopping at a particular shop or chain of stores. Loyalty
cards can not be used to draw cash as they offer no line of
credit to their holders, so they can not be used to make
purchases and you can't run up a balance the issuers can charge
interest on.
Some loyalty cards offer money off particular ranges of
products, so if you buy those items you will save money. This
can create a two tier pricing structure where customers can be
punished for not carrying the loyalty card, but where you are
rewarded for using them. If you shop regularly at a store it
makes sense to carry the loyalty card but be aware it does not
mean that store will always be the cheapest.
The loyalty cards cost money to produce and the loyalty scheme
costs money to run, customers have to be notified of their
rewards, so what is the point of the issuers running them?
Well the shoppers habits could lead to contact from targeted
sales, you regularly buy this so why not buy that. It you failed
to tick the right box on the application your junk mail could
increase. Stores say they use the information to stock the items
in demand and not to fix prices or push particular sales.
And
finally studies in shoppers habits have revealed they are much
more likely to shop at a store if they carry their loyalty card,
and they could be missing out on bargains at that stores
competitors.
Credit facilities is when an establishment be it a business or
shop, has a pre-arranged set up in place to process their
customers applications for finance. When shopping for goods or
services you may find that you are unable to pay the bill
immediately. You could decide to pay on your credit card if you
have a sufficient balance left, or you could choose to apply to
use the stores credit facilities.
You are given an application form which requires your personal
details and how much you need to cover your purchase, this is
then forwarded to the lenders, where they make a decision on
your suitability. Acceptance will still be dependant on your
credit history and status but the process is fast and most
applications are approved or denied over the phone. If you are
accepted you will be allowed to take your purchase away there
and then.
However most of these policies come with pre-set rates and with
set repayment terms, that do not take account your personal
circumstances and credit rating. The rates charged are higher
than most other finance products with very steep charges for
missed payments and arrears.
Most customers would be able to find a personal loan that
charges far less than these policies, even those with some form
of problem credit.
No sale or deal you need to use credit
facilities for is that good, the rates charged could easily
account for any savings you think you've made.
Repayments will usually have to be made monthly for a set term
and payments might have to be taken directly from customers bank
accounts, so care as to be taken to ensure adequate funds are
available to cover the withdrawal.
Consolidation or "debt consolidation", is a the term used to
describe a method of managing owed debt. Consolidation involves
calculating all the outstanding debts together with any arrears
and getting a total on how much is owed. Then a personal loan is
arranged and used to clear those debts. This then leaves only
the latest loan to be repaid, meaning a single rate of interest
being charged and is easier to manage and keep track off.
If you carry multiple credit cards, store cards or have used a
stores credit facilities to make a purchase and have not cleared
the balances you may be interested in consolidating the debt.
Consolidation could save a lot in interest charges on the owed
debt and should make managing your finance easier.
The Grabber has a section on
consolidation for visitors interested in the process.
APR |
Career Loan |
Consolidation |
Creditors |
Credit Cards |
Credit Facilities |
Credit Check |
Credit Score |
Debit Cards |
Debt Management Services |
Event Loans |
Holiday Loan |
Homeowner Loan |
Loan Term |
Loyalty Card |
Medical Loan |
Store Card |
Tenant Loan |
Term |
Secured Loan |
Unsecured Loan |
Wedding Loan |
