Virgin Cards: make more of your money

A balance transfer is when you use your credit card to pay off the balance from another credit or store card. Because you then owe your new credit card provider money instead of the original lender, you’ve effectively ‘transferred’ the balance to your new credit card.

As long as the credit card you’re moving the balance to has a lower interest rate, and depending on any balance tranfer fee, this can be a handy way to reduce the amount of interest you pay and save money.

‘Balance transfer cards’ are simply credit cards which offer reduced introductory rates for making balance transfers, though you can also use them to shop with as normal.

Some things to consider:

• How long will the introductory rates last?
• Is there a fee for making balance transfers? A card may offer an attractive rate, but if the rate doesn’t last long or you’re charged a lot for making a transfer, you might not save money in the long run.
• What will the standard interest rate (commonly referred to as APR) be after the introductory rate has finished? That’s the rate of interest you’ll pay on any balance you have left.
• If you also use the card to buy things before you’ve paid off your transferred balance, make sure your monthly payments will be used to pay off your higher interest ‘retail’ balance first, and not your lower interest ‘transferred’ balance.

Put simply, retail cards are designed for spending.

They’re a type of credit card which often give you a reduced interest rate on the purchases you make with your card. Sometimes the lower rate is a permanent feature of the card, or it may be a promotional offer, which reverts to a higher interest rate at the end of an introductory period. Either way, they usually give shoppers a bit more breathing space to pay off their purchases before they attract interest.

Some things to consider

It’s important to know how long the introductory rate on a retail card will last, and what the standard interest rate (commonly referred to as APR) will be once it has finished. If you don’t pay off all your balance before the introductory rate finishes, the standard interest rate (commonly referred to as APR) is the rate you’ll pay on what’s left.

‘Balance transfer and retail’ cards generally offer the best of both worlds – low introductory interest rates on balance transfers, and also on what you spend.

These cards are handy if you’re looking to save money by paying off your existing debts at a lower rate, but you also have things to buy.

Some things to consider

Just like individual balance transfer cards and retail cards, it’s important to know how long your introductory rates will last, what the standard interest rate (commonly referred to as APR) will be once these rates have finished, and any fees which may apply.

With a combined ‘balance transfer and retail’ card you may be paying off two different balances at two different rates, so you should find out how your repayments will be used. It may be the balance with the lowest rate of interest is paid off first, leaving the balance with the higher rate to gather more interest. See our guide to making repayments for more information on this, and tips to help you pay as little interest as possible.

Some credit cards reward you for spending on them. The rewards are often cash back, air miles, or points you can redeem in shops.

Reward cards are a good choice if you can pay off your balance before interest starts building up, otherwise the interest and fees could outweigh your rewards.

Some things to consider

If you’re looking at a cash back card, make sure you know how much cash back you’ll earn, how you’ll receive it, and how often it’s paid out.

To take full advantage of a ‘points’ card, check you’ll earn points with retailers you use regularly and that you can redeem the points for things you use. You won’t benefit from building up points to use in places where you never shop. Some points schemes may let you swap points for shopping vouchers which are worth even more.

Like a reward card, you earn cash back or ‘points’ every time you spend with a charity credit card. The big difference is the money is donated to your charity.

So, charity credit cards are a great way to raise money for a cause you care about while going about your everyday life. Without lifting a finger, they let you give automatically every time you shop, eat out, or buy petrol on your card.

Some things to consider

These cards offer the best value if you can pay off your balance before you start building up interest, otherwise the interest and fees could outweigh your donation.

Here are some important points to consider with any credit card:

• Credit cards offer you protection on the things you buy. If you spend between £100 and £30,000 on your card and the goods turn out to be faulty or the company you’ve bought from goes bust, you can claim the money back from your credit card provider.
  
• Some credit cards have annual fees, so always check this out. Whether these fees work out as good value will depend on the type of card you go for, and how you use it.
• Some credit card providers use ‘risk based pricing’. This means the APR they advertise can change once you apply for the card, depending on your personal circumstances.
• Make sure you have a close read of the terms and conditions of any credit card before you apply for it to make sure it suits your needs.

• If you can always pay off your balance in full each month, you shouldn’t pay any interest.
• If you can’t always pay off your balance in full, make sure you know when your introductory and promotional rates end, and what gets paid off first, to limit the amount of interest that builds up.
  
  For example, if you’ve made a balance transfer at a rate of 0% and you’ve also made purchases with your card at a rate of 16%, some credit card providers may use your repayments to pay off the balance transfer first. This means interest will continue to be added to your higher rate purchases, which you might not have realised.
• Check how long your minimum repayment will take to reach your credit card provider. Even if you make your payment on time, if the money doesn’t reach them by your payment due date you could still be charged a late payment fee.
• Setting up a direct debit for your minimum repayment is a great way to avoid ever getting a late payment fee. You can usually set up the direct debit to pay off the minimum repayment or whole balance each month. You can also make additional one-off payments during the month if you wish.