Capital One Credit
Card
Seven Reasons To Fear Capital One Credit Cards and other cards
If you don't learn how to control your credit cards, then -- sooner or later
-- your credit cards are going to end up controlling you.
I know exactly how it feels to be working for banks and other lenders, as I
spent a far part of the Nineties labouring under the weight of up to thirteen
maxed-out credit cards. Having weaned myself off my addiction to overspending,
I've vowed not to 'do' debt again. So far, so good.
Although I've had my 'light-bulb moment' and now know how to play the
credit-card game to my advantage, the same can't be said for Brits in general.
At the end of 2005, there were almost 75 million credit and charge cards in the
UK, but only 48 million adults. What's more, at the end of February 2007, we
owed around £55 billion on our credit cards, with three-quarters (75%) of
balances being interest-bearing.
Thus, it seems to me that, on the whole, we don't enjoy an ideal relationship
with our flexible friends. If you'd like to get wise to the tricks that credit
cards play, then read on. By the way, the following topics are in alphabetical
order, and I will reveal seven more traps after the Easter break in part two of
this piece:
1. Annual fees are making a comeback
Throughout the Eighties and early Nineties, annual fees were the norm, as
most credit-card issuers levied them. However, aggressive competition from the
likes of the 'American Eagles' (Advanta, Capital One, MBNA, etc.) saw annual
fees all-but-abandoned in the mid to late Nineties.
Sadly, as lenders attempt to cope with rising bad debts and an enforced
reduction in late-payment fees, annual fees are now making a comeback. More than
a dozen cards now levy annual fees, and firms such as Lloyds TSB and MBNA are
selectively introducing annual fees, targetting unprofitable customers and
dormant accounts. So, keep a close eye on your monthly statements, in case your
card issuer decides to spring an annual fee on you.
2. Balance-transfer fees are rising
If you're paying interest on your credit-card debts, try transferring them to
one of the dozens of cards which offer introductory interest-free periods
lasting from five to twelve months. These 0% balance transfers cost card issuers
a lot of money to subsidise.
So, lenders have responded by bringing in transfer fees to offset the cost of
providing interest-free credit. If you opt for a 0% balance transfer lasting six
months or more, then expect to pay a fee of, say, 2% to 3% of the value of each
transfer.
3. Card protection plans aren't worth it
Last year, I acquired a new credit-card and, sure enough, the annoying sales
calls began. One product on offer was a card protection plan from the likes of
CPP and Sentinel. This cost £29 a year and provided protection against losses
due to fraud and theft. Naturally, I turned down this kind offer, explaining
that the true cost this product should be about £3 a year. Also, the Consumer
Credit Act limits my liability against fraud to just £50 -- and card issuers
usually waive this sum.
4. Cash interest rates are extortionate
If you use a credit card to withdraw cash from a cash machine or over the
counter, watch out for two things: cash-withdrawal fees (see point 5) and
sky-high rates of interest. Although a typical credit card will charge an
interest rate of around 16% a year on purchases, interest rates for cash
withdrawals are far higher -- anything from 20% to 30% a year. Even worse, you
lose your normal interest-free period of between 45 and 56 days). Ouch!
5. Cash-withdrawal fees are steep
As well as attracting higher interest rates and forfeiting your interest-free
period, making cash withdrawals on credit cards racks up additional fees. Until
last year, this fee was, say, 2.5% of the amount withdrawn, with a minimum
charge of £2.50. However, cash-withdrawal fees are on the rise, with many
issuers now charging 3% (minimum £3). So, get the message: credit cards and
cash don't mix. Stick to making fee-free, interest-free cash withdrawals with
your debit card.
6. Credit-card cheques are a rip-off
Unsolicited credit-card cheques are of my pet hates. Indeed, I've closed more
than one account because a card issuer kept sending them to me. The big problem
with credit-card cheques is that, nine times out of ten, they are treated in a
similar fashion to cash withdrawals. Thus, although they offer 'convenience and
flexibility', these benefits come at a high price. (While most credit-card
cheques charge high rates of interest plus handling fees, look out for low-cost
balance-transfer cheques which charge low rates of interest and could save you
money.)
7. Foreign usage fees gobble up your spending money
When you spend on a credit card abroad, buy from an overseas website, or pay
for goods in currencies other than sterling, all but a few credit cards charge
you an extra 'foreign currency conversion' fee. Typically, this adds 2.75% to
the cost of overseas purchases, or £5.50 for every £200 spent. To avoid paying
this unnecessary fee, be sure to take the right plastic abroad. The following
cards don't levy this charge, both in EU states and worldwide:
Foreclosure
Defense Secrets.