Get offered the best credit card rate

October 4, 2006

There has been good and not so good developments in the credit card market this year.

With credit card spending slowing down and actual credit card debt decreasing in August, credit card companies and banks are pulling out all the stops to encourage us to start using our plastic more. The good news has come in the shape of more and better introductory offers like an increase in 0% balance transfer deals, better card rewards and cash back that can reach up to 3% of what you spend!

Earlier this year the Office of Fair Trading (OFT) forced the banks and credit card companies to cut their default charges to a maximum of £12.

This was seen as a victory for the consumer, however, this is where the not so good news starts to kick in. Having seen a huge chunks of their profits taken away by the OFT decision the banks and credit card companies have fought back with an introduction and increase in fees for the likes of balance transfers. Disapointingly, credit card interest rates have also been increased and in some cases quite dramatically.

Just last month Moneyfacts reported that 19 credit card suppliers had increased their interest rates over the previous 3 months. There is no getting away from the fact that credit card interest rates are at a high at the moment. The people who cannot or do not clear their monthly balance are now picking up the tab for the OFT decision.

Now if you do have an outstanding balance at the end of each month, please do not just keep to the minimum payment. Use our minimum payment calculator to see how much more you could be paying.

Another way to try and save costs on interest is to make sure you are offered the best rate by a credit card company. The phrase “Typical APR (variable)” is always shown in a credit card product description. Credit card companies are required by law to show their typical APR interest rate, however, this does not mean that you will be offered this rate.

Credit card companies never offer the same credit card interest rate to all of their customers. They actually have a number of interest rate bands and will place you in the appropriate rate band according to your credit worthiness.

Your credit worthiness is based partly on your credit score and this is calculated by a credit reference agency. There are a number of factors that a credit reference calculate your credit score on and these include:

• If you rent or own your home
• The value of your home if owned
• The length of time you have held your current job
• The length of time you have lived at your current address

There are a number of things that you can do to ensure you have a better credit score. By doing these you will have a better chance of being offered a credit card that does reflect the “Typical APR (variable)”

• Ensure you are registered on the electoral roll
• Make sure you pay your bills on time
• Beware of joint applications in case your partner has a poor credit history
• Only apply for one credit card at a time and if you are rejected do not apply for too many over a short period of time. Credit applications that are declined are recorded on your credit score.
• Cancel old credit cards. Do not just cut them up or store them at the back of a drawer. Call your credit card company and follow this up with a registered letter.

I realise this may sound obvious but enter a land line telephone number in your application instead of a mobile. Lenders like to see stability in an applicant