Use this credit card trick to clear your debt!

This little known credit card trick can clear your expensive debt. We tend to think that a credit card from is more expensive than a personal loan. Strangely, though, the cheapest credits cards usually undercut the cheapest loans. So, it might be a good idea to consider using a credit card to borrow the money you need.

How to Borrow With a Credit Card: Best Options

There are two ways you can do this (1) with a money transfer or (2) with a card that charges 0% interest rate. In the first case, the card firm issues a credit card for you that can do a bank transfer (pays money into your bank). Then, you need to pay back the money the card firm lent you at 0% (plus a small fee). Since you won’t need to repay a credit card in the same way as a loan, you do need to be very strict with yourself and also disciplined so you manage to pay back the money you borrowed and not pay a penny more than you what you owe due to late payment fees.

Note: Before you decide whether to apply for a credit card or personal loan, determine why you are getting a loan in the first place and how much you will need to borrow.

In this guide, you will find the most common situations where one may need a loan for and where having a credit card is more beneficial than getting a loan.

A Credit Card Is The Right Option For You If You:

  • Need up to £5,000 – If you have a good credit score, the maximum amount you can borrow with a credit card is usually no more than £5,000. If you need more than £5,000, then a loan will probably cover your needs better.
  • Can Clear the Credit Card in 32 Months – Most credit card firms offer 0% spending on a credit card for up to 32 months. If you are certain that you can budget to repay the debt within those 32 months, then go ahead and apply for the credit card. If you don’t manage to repay the debt within that time frame, you could consider transferring the debt to another card before the expiration of the 0% period (make this a last resort option).
  • Want to Pay a Retailer That Doesn’t Take Credit Cards Without Getting a Loan – For the cases when the retailer doesn’t take credit cards, you can get a specialist money transfer card, which will allow you to transfer money from your new card to your bank account. Then, you can spend the cash as you would with a loan and just repay the card (plus a 3.45% fee for the transfer) over the next 32 months. Please note that there are also cards that give you debt at 0% for 25 months and let you do money transfers for 2% fee.
  • Want to Make your Debts Cheaper – You will find plenty of balance transfer deals that will let you shift debts from other cards to the new credit card at a special cheap rate. That rate is usually much less costly than the cheapest loan. Most of the times, these are 0% deals. The best case scenario? You make
  •  that are similar to what the loan would cost.

A Credit Card is NOT The Best Option If You:

  • Need More than £5,000 – The credit limit of a credit card cannot be higher than £5,000.
  • Want to Cut the Cost of an Older Loan – Older loans usually come with hefty penalties for moving. This means that although you pay less interest, you will eventually end up paying more overall if you move. So, switching to a cheaper interest rate is not always the best option to help save money. Our Loan Switching Calculator will help you decide whether switching loans is worth it.
  • Can Get a Loan From Your Employer – Some employers offer up to £10,000 (some even more) to their employees as loan, usually for travel purposes (i.e. to purchase travel season tickets to commute to work). If your employer can give you such a loan, you can pay it back from your salary. It is the cheapest loan you can possibly get.

The Borrowing Money Bible: The 5 Golden Rules

For certain amounts, the cheapest credit cards can be by far a better option than the cheapest loan rates. Plus, they give you a much-needed flexibility to pay the debt back on terms that are more convenient to you and suitable to your requirements. However, if you want to make the most of a credit card, there are 5 tried-and-true, golden rules you should follow before you decide to apply for a cheap credit card loan.

Rule #1: Borrow Money ONLY If You Really Must

What you want to borrow money for matters a big deal. If you need cash to, say, renew your window treatments because the old ones bore you, stop right there. This type of borrowing will lead you directly to spending you can’t actually afford. Not to mention that you seriously risk getting into more debt in the future to repay an older debt (the one you are about to throw yourself into). Instead, use a budget planner and plan your purchases wisely.

Now, if you want to make a necessary (planned) purchase, such as the family’s first car, try to borrow the lowest amount of money you need for that purchase and make sure you can repay the debt within the 0% promotional period ends.

Remember:

  • To cut the costs of an existing debt using a credit card, you can consider special balance transfer credit cards. They will allow you to pay off existing debt (credit and store cards) at 0%, for a small fee. That way, your repayments will not cover the interest, only your debt, which means that you will be free of any debt quicker.
  • To make an existing personal loan cheaper, watch out for switching loans penalties, especially if the difference in interest rate is not all that significant.
  • To make a big, one-off purchase, it is always best to use the card(s) with the lowest interest rate possible or the longest 0%. For a big purchase, you will also need a card with a large enough credit limit. Bear in mind, though, that credit cards are not accepted as a payment method by all retailers.
  • If you want to borrow a large sum (more than £5,000), say, to buy a car from a retailer that doesn’t accept credit cards. For smaller amounts, you can use money transfer credit cards.

Important Note: It is critical to understand all the details correctly before you proceed with getting a credit card or personal loan because a mistake could deliver the exact opposite results. So, please make sure you read through the whole of this guide carefully and meticulously.

Rule #2: Do NOT Add Further Spending

Since you have a limited time to repay the debt (as long as the 0% promo offer lasts), it is crucial not to add further spending to the card. Otherwise, you will need to readjust your monthly repayments, which, in turns, will force you to stretch your budget. Then, chances are, you won’t be able to stick to your budget and benefit from the 0% period the most. So, once you have spent your loan amount, better lock the card away and keep it out of sight until, at least, you have repaid all your debt.

Now, about spending on a money transfer card, it is strongly advised to refrain from doing that because 9 out of 10 times people end up paying a typical 20% interest rate on the purchases they make using a money transfer card. Yes, the lender will prioritise repayments to the most expensive debt. We like that. But, it will take you some serious time to pay off the card completely.

Rule #3: Set Up Structured Payments

The best idea when you have used your credit card is to treat it like a loan and pay it off in fixed, monthly installments so you can clear your debt in a specific amount of time. The easiest way to achieve that is to set up a direct debit and, of course, remain loyal to this decision.

When it comes to the sum of those monthly installments, although it may be tempting to pay less (considering that credit cards give you that kind of flexibility), I suggest you don’t do this. All you will accomplish by depositing less money is to pay much more interest and drag repaying your debt for an unnecessarily long time. And, if you do need to pay less, try to keep it short (only for the period of time necessary) and, please, not make it a habit.

Note: Always pay, at least, the minimum repayment of the credit card, which is usually around 3% of your outstanding balance. Though, it is much more preferred to try to pay more, if you can afford it, of course, especially in the first few months, when the debt is bigger. The point is to pay off the card loan the quickest possible without having any penalties for it. That way, you pay less interest and get rid of debt fast.

Rule #4: Repay The Debt Before The End of The 0% Period

As soon as you are accepted, set up a direct debit. Make sure the amount you pay is, at least, the minimum repayment. Don’t get carried away by the fact that it is a low rate or even a 0% card. You do need to make repayments every single month. The goal here is to benefit from a cheap deal. The only way you can do that is by ensuring you don’t miss a repayment and get it all over with before the 0% period ends. Otherwise, the APR will increase and you will need to pay an extra £12 fee. Not to mention the interest, which will climb to a soaring 18.9% after the 0% is over.

Rule #5: Know Your Deal

Sometimes, the headline offers are tricky. They advertise a 26-month 0% spending card but what you eventually get is a totally different story. I mean, yeah, you might get exactly the deal advertised if your credit score is nearly perfect. But, you may as well be given 20 months at 0% if you are accepted. This mostly has to do with your credit score and, consequently, your credibility in the eyes of the lender. The poorer your credit score, the more risk lenders see in your case.

If your credit score meets the minimum criteria of the card provider, chances are you will be accepted for the card. However, the offer will be different. For example, you may be given a card with a higher APR or a lower number of months at 0%. Unfortunately, there is no foolproof way to know what deal you will end up getting before you apply.

0% Money Transfer: Turning a Card Into a Loan

Having a credit card that allows you to do money transfers is a significant ally in repaying debt, especially for loans of less than £5,000, which is the typical credit limit most people get. You simply use the card to shift cash into your bank account and then owe that amount to the card, instead of the bank. Just try to find a card that offers such transactions at a low interest rate.

The trick here is to NEVER withdraw cash. So, ask the card provider to do a money transfer to your current account (you will be charged a special promotional interest rate for it) and refrain from spending on the credit card. Otherwise, you will most likely lose the special deal and be called to repay your debts with 20%+ APR. To stay on the safe side, I suggest you make the minimum repayment every month (if you can’t afford to pay more than the minimum), as mentioned above. Don’t forget that it is critical to repay the debt by the end of the 0% (or whatever low-interest) deal.

FAQs: Credit Card Loans

Q: Can I cut the cost of an existing loan with a card?

A: Yes, you can. I suggest you do it with a money transfer card, provided your loan is up to £5,000 and the money transfer fee and rate of interest (if you haven’t found a 0% deal) are less than the cost of the interest on the loan you have. In this case, you can use the cash paid into your bank account from the credit card to pay off the loan. Now, if your loan is higher than £5,000, it might be much more difficult to find a credit card with a credit limit that meets your requirements.

Important Note: Please read through our guide and use money transfer cards exactly as suggested here to avoid making a mistake that could cost you big time.

Q: What happens if I don’t manage to repay the card at the end of the 0% deal?

A: If you had managed to repay within the 0% spending card promotional period, you could possibly borrow again for free. Now that you haven’t, it all depends on your credit history. With a decent one, you could transfer the remaining debt onto a 0% balance transfer card (if one is available at that time). Then, follow the steps suggested in this guide and repay the debt before the expiration of the 0% deal.

Remember:

  • Most top balance transfer cards do not have a promotional rate on spending. For that reason, it is suggested you don’t spend further on the card.
  • Make sure you move the remaining debt onto another 0% spending card before the promotional 0% period of your previous card ends. The interest rate after the end of the promo period can be devastating.
  • An all-rounder card is your best alternative is you want to borrow more money or combine a 0% balance transfer card and a 0% spending card in a single card but don’t want to take out a new 0% spending card.

Q: I need more money. Should I apply for another credit card?

A: As highlighted above, it is likely you get a lower credit limit than what you have asked for. Unfortunately, there is no way you can know that for sure before you apply. This is because lenders take into consideration factors, such as your credit score, to determine your profitability, and then give you a credit limit accordingly. If you end up not getting the maximum credit limit you expected, I suggest you don’t apply for another card because every time you apply for a card your credit score is affected. Instead, use whatever limit you have been given and ask for an increase after a few months.

Q: I want to withdraw cash on a credit card. Is this wise?

A: Please note that such cash withdrawals are recorded on your credit report (not to mention that they are expensive). If you do this often, lenders may take it as a sign that you are in desperate need for money and that you don’t have any cash in your current account. Adding the fact that you are willing to pay the high interest rate for some cash, you can understand that things won’t look good for you and your credibility should you need, say, a personal loan in the future.

Q: Are specialist cashback sites a good option for me if I need to borrow money?

A: I would say yes, because they usually pay you when you sign up to financial products on their website. However, nothing is 100% guaranteed with these websites until the money is in your account. Just be careful before you sign up to any financial product as cashback terms may vary significantly between applicants.

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One of the main rights which the Data Protection Act gives to individuals is the right of access to their personal information.  An individual is permitted to send us a subject access request (“SAR”) requiring that we tell them about the personal information we hold about them, and to provide them with a copy of that information.  In most cases we must respond to a valid subject access request within 40 calendar days of receipt.  Any business is able to charge a customer a reasonable charge of £10 for providing this data however it is not our companies policy to do so unless the request is excessive or unwarranted.  Any Subject Access Requests must be sent to a Senior Manager for processing purposes.

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Our Privacy policy is in full view on our website.  This section must be read in conjunction with the Privacy Policy.

It is the responsibility of the senior management of our firm to ensure this policy is effective through monitoring and complaints procedures.

All employees, affiliates and ARs dealing with customers have a responsibility to read, understand and implement this policy and to hold their own valid and appropriate Privacy policy where appropriate.

The Firm holds a valid Data Protection license and it is bound by the rules of the Data Protection Act 1998.  The full extent of the rules can be found at www.dataprotection.gov.uk.

The 8 principles that the 1984 Act introduced are as follows.  Data must be:

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When submitting application forms to banks, insurance companies and other financial institutions, this means that personal data will, by default, also be submitted.  In these cases, clients will be informed that their personal data may be used.

The Firm will request client consent before any transfer of data takes place.  Clients will be asked to confirm that they are comfortable to have their personal data used in one or more of the following forms:

Post, telephone, email etc. subject to the conditions of the Data Protection Act.

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The following definitions provide a summary of the information classification levels that have been adopted by our firm and which underpin the 8 principles of information security. These classification levels explicitly incorporate the Data Protection Act’s (“DPA”) definitions of Personal Data and Sensitive Personal Data, as laid out in our firm’s Data Protection Policy.

‘Confidential’ information has significant value for our firm, and unauthorised disclosure or dissemination could result in severe financial or reputational damage to us as an FCA authorised firm, including fines of up to £500,000 from the Information Commissioner’s Office.

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Designating information as ‘Confidential’ involves significant costs in terms of implementation, hardware and ongoing resources, and makes data less mobile. For this reason, information owners making classification decisions must balance the risk of damage that could result from unauthorised access to, or disclosure of, the information against the cost of additional hardware, software or services required to protect it.

Examples

Security Level

Definitions

Examples

FOIA2000 / DPA1998 status

1. Confidential

Normally accessible only to specified and/or relevant members of our staff

DPA-defined Sensitive personal data:

·                     racial/ethnic origin

·                     political opinion

·                     religious beliefs

·                     trade union membership

·                     physical/mental health condition

·                     sexual life

·                     criminal record

·                     salary information

·                     individuals’ bank details

·                     passwords

·                     large aggregates of DPA-defined Personal Data (>1000 records) including elements such as name, address, telephone number.

·                     HR system data

Subject to significant scrutiny in relation to appropriate exemptions/ public interest and legal considerations.

2. Restricted

Normally accessible only to specified and/or relevant members of our staff

DPA-defined Personal Data (information that identifies living individuals including:

·                     home / work address

·                     age

·                     telephone number

·                     schools attended

·                     photographs

Subject to significant scrutiny in relation to appropriate exemptions/ public interest and legal considerations.

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Normally accessible only to our staff

·                     Internal correspondence,

·                     internal group papers and minutes,

·                     information held under license company policy and procedures

Subject to scrutiny in relation to appropriate exemptions/ public interest and legal considerations

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Accessible to all members of the public

·                     Company filed documents

·                     Company websites

Freely available on the website.

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We recommend that departments and functions within our business explicitly designate information owners.

Other users may have rights of access to data according to the terms of engagement under which the data was gained or created.

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The sets of information being classified should, in general, be large rather than small. Smaller units require more administrative effort, involve more decisions and add to complexity, thus decreasing the overall security.

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A violation of this policy and misuse of the systems and applications within our firm may also be a breach of the Computer Misuse Act 1990; consequentially the company may at its discretion take legal action against an individual or organisation that is found to be in breach of its policies.

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 We may as a result of a consumer or a third parties’ interaction with our website/s obtain their personal data and process their information on our computers and in any other way.

By “third parties” we mean any lender, broker or affiliate who interacts with us in enabling a consumer to make a loan application.

We will use the information to manage their account(s), give them statements and provide our services, for research, assessment and analysis (including credit and/or behaviour scoring, market and product analysis) and to develop and improve our services to the consumer and other consumers and protect our interests.

We, and other carefully selected third parties, will use their information to inform them by post, fax, telephone or other electronic means, about other products and services (including those of others) which we believe may be of interest to them.

If they contact us, we may keep a record of that correspondence.

We will keep details of transactions they carry out through our site and of the fulfilment of their applications and their loan history.

We will keep details of their visits to our site including, but not limited to, traffic data, location data, weblogs and other communication data and the resources that you access.

In order for us to be able to collect and use personal data and / or to pass If they do not want us to use their data in this way, or to pass their details on to third parties for marketing purposes, customers must manually opt in to this agreement (See CONC section of this Compliance Manual).

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 We may collect information about their computer, including where available their IP address, operating system and browser type, for system administration and to report aggregate information to our advertisers. This is statistical data about our users' browsing actions and patterns, and does not identify any individual.

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 For the same reason, we may obtain information about a consumer’s general internet usage by using a cookie file which is stored on their browser or the hard drive of their computer. Cookies contain information that is transferred to their computer's hard drive. They help us to improve our site and to deliver a better and more personalised service. Some of the cookies we use are essential for the site to operate.

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Please note that our advertisers may also use cookies, over which we have no control.

Cookies can be blocked and a consumer may not be able to access all or parts of our site. Unless a consumer has adjusted their browser setting so that it will refuse cookies, our system will issue cookies as soon they visit our site.

Where we store data

The data that we collect from a consumer is stored within the European Economic Area ("EEA"). Such staff may be engaged in, among other things, the assessment and fulfilment of a consumer’s application, the processing of a consumer’s bank details and the provision of support services. By submitting their personal data, they agree to this transfer, storing or processing.  We will take all steps reasonably necessary to ensure that a consumer’s data is treated securely and in accordance with this privacy policy.

All information a consumer provides to us is stored on our secure servers. Any transactions will be encrypted. Where we have given (or where they have chosen) a password which enables you to access certain parts of our site, they are responsible for keeping this password confidential. We ask a consumer not to share a password with anyone.

The transmission of information via the internet is never completely secure. Although our systems exceed industry standards for security, and we will always do our best to protect a consumer’s personal data, we cannot guarantee the security of a consumer’s data transmitted to our site; any transmission is at their own risk. Once we have received their information, we will use strict procedures and security features to try to prevent unauthorised access.

Disclosure of information

We may disclose a consumer’s personal information to any member of our group, which means our subsidiaries, our ultimate holding company and its subsidiaries, as defined in section 1159 of the UK Companies Act 2006.

We may disclose a consumer’s personal information to third parties:

Credit Reference Agencies (CRAs)

When a customer makes an application for a credit, we will check whether they are likely to be able to meet the monthly payments and repay the loan.  However, we are limited in what we can actually do as we do not work directly with CRA’s as we are not eligible to do so.  We will work with what the applicant divulges on their fact find/application but we can only judge as accurately as the information given allows.

When we submit an application to a lender, it is normal practice for a lender to carry out a credit search with a CRA.  In the past, this would have left a search ‘footprint’ on the applicants’ credit file that may be seen by other lenders. Large numbers of applications made within a short period of time would adversely affect a customer’s ability to obtain credit, and they should always consider this before making an application for a loan.

However, the lenders that we have chosen to deal with offer a facility known as a ‘quotation’ search, which does not leave a footprint. This is in line with CONC 2.5.7 which suggests that during the ‘shopping around’ process of the customer, the lenders that we promote should only use a ‘quotation search’, which does not leave a footprint.

Access to information

The Act gives a consumer the right to access information held about them. Your right of access can be exercised in accordance with the Act. Any subject access request may be subject to a fee of £10 to meet our costs in providing them with details of the information we hold about them.

Changes to our Privacy Policy

 Any changes we may make to our privacy policy in the future will be posted on our web page, and, if appropriate, notified to consumers by e-mail.

Questions, comments and requests regarding this privacy policy are welcomed and should be addressed to moneynerduk (at) gmail.com.

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