Which? verdict on Halifax credit card changes
Halifax and Bank of Scotland (HBOS) announced changes in interest rates that affect all clients credit card existing. To provide consumers with greater transparency, movement, customers will have a single interest rate for all transactions, including purchases and cash withdrawals.
HBOS has introduced three major changes:
A single rate will be charged interest, specific to individual customers and how they use their card interest rate customers will be linked to base rate of the Bank of England, Halifax describing the circumstances under which it will re-price a client's personal rates in the future.New customers and customers of clarity cards will not be included in the changes at first, but will be moved to the new tariff structure in 2012.
Below, Which?Credit card expert Martyn Saville examines each aspect of the new tariff structure, explaining the pros and cons and reach a verdict on the new regime.
Personal interest rates based on how a customer uses his credit card HBOSHow it works: In August 2011 existing customers will be moved to a single rate of personal interest. It will not be charged different rates for purchases and cash withdrawals.
rate of new personal customers will be an average interest rate applied to current standard balances on their credit cards between January and March 2011.For example, if you have an outstanding balance which is purely made up of purchases, your personal rate will be at your rate of purchase. However, if your outstanding balance is made up of a combination of purchases and cash withdrawals, your personal rate moves at an average rate applied in these balances.
Advantages: The new system makes it easier to know what interest rate you will pay, regardless of the transaction. If you used your credit card for purchases in the first three months of 2011, your rates should not increase. In fact, many customers will see their interest rates fall.And if you need to use your credit card to withdraw money from a future emergency, you'll pay a lower rate than you right now. 0% promotional balance transfer offers will still be offered.
Disadvantages: If you used your card for cash withdrawals recently, chances are your interest rate will increase purchase, costing more if you borrow on the card. Cash advances are not interest-free period and there is a charge of 3% on each withdrawal transaction. While cash withdrawals now have a lower interest rate, this does not mean they are good value.
Can A Balance Transfer Credit Card Really Save Me Money?
You hear all the time about balance transfer credit cards . They are one of the ways that credit card companies are able to obtain new accounts. The idea is a smart one: offer a great deal to transfer over some credit card debt, and a prospective customer will instantly become that company’s customer, since their debt has changed hands.
But is it really worth it from a personal finance perspective for you to do this? Are you really going to be able to avoid interest rates and fees? Here are a few tips on how to really save money using this very attractive promotional feature.
Balance Transfers Are Not FreeThis is something that we should get out of the way first. Credit card companies are not in the business of losing money. Because of that, they’re looking to make money from you. Simple as that. So when you go into a balance transfer offering, make sure you read the fine print . It is fine print so it’s harder to read, but that doesn’t mean you shouldn’t look at it.
Balance transfers require a fee to process. It’s usually in the single percentage range, like 3-5%. If you have $5,000 in debt you want to transfer, that’s going to cost you $250 with a 5% balance transfer fee. Keep that in mind while we delve deeper here.
How Much Are You Currently Paying in Interest?Let’s go back to the $5,000 of debt on a card. In order to find out whether a balance transfer is right for you, it’s best to calculate how much interest you’re paying per year on that debt with your current card. This doesn’t require a math whiz: you can just take the amount you paid in your last statement and multiply that by twelve months.
If you’re planning on moving to a card that has 0% interest on balance transfers but charges that 5%, find out which one is the better deal. You’re going to pay either way – but it’s better to find the lesser of the evils here. This can be used for any amount of debt.
Call Your Current Card’s Customer ServiceWe all hate to call customer service, but if you can spend twenty minutes on the phone, it’s possible for you to save a lot of money. Call up the number on the back of your current card, and tell the representative that you’re thinking about moving your balance. You might be able to get a lower rate.
Don’t get caught up in other things that the rep may try to offer you – only negotiate on interest. The credit card company wants to keep you, but if the interest is still too high, thank the rep for her time and start really considering a balance transfer credit card if they will not work with you.
0% Balance Transfer Credit Cards
April 2011 - Best zero percent balance transfer credit card offers. Why pay interest when you can use a 0% balance transfer credit card offer? 0% APR cards.
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