Archive for the ‘Credit Cards’ Category

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What’s the difference between a Visa debit and Visa credit card?

It can be confusing but if you don’t fully understand the difference then it can end up costing you a lot of money!

The Visa debit card (or Maestro card or many other variations) is a card that allows you to pay for goods and services but the money comes directly from your bank account, thus you can only draw as much as you have in your account or up to the overdraft limit that you have. Usually, unless you are already overdrawn or it takes your account overdrawn, you won’t pay interest on the amount paid.

However, a Visa credit card is a line of credit granted by the credit card provider up to previously agreed limits. Each month you pay back either the minimum, a fixed amount or the whole balance. If you pay back the minimum or a fixed amount, leaving a balance on the account, you will PAY interest on the balance… and this can be a lot of money!

Know the difference between the two types of cards and keep a close eye on your spending. That way you won’t slip into any difficulty with money.

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Should I invest in a cash ISA? With interest rates so low and, worse still, savings rates so low, I have to question the wisdom and advice that some financial advisors are giving their clients right now and telling them to go ahead and invest in a low paying cash ISA.

All things being equal, it seems a nonsense to me. If you have money in the bank saved up for day to day emergencies, a long term savings plan in place for those larger items you want and around 3 to 6 months money stashed away for redundancy protection until you get another job, then I believe you should use all your spare savings to pay back unsecured (or secured) debts.

Let’s look at some figures to make it easy for you. You have £3,600 now and you’re not sure what to do. ISA rates are around 1% (say) but the debt on your credit card (ignoring introductory rates and special deals and assuming you are only paying the minimum) is around the 19.9% mark. “DO THE MATH! ” (as the Americans would say). To be able to earn enough to offset your credit card payments you would need to earn a credit rate of 24.875% (assuming you’re a basic rate – 20% – tax payer). Compare 24.875% against 1%.

Conclusion: PAY OFF SOME DEBT and start turning the tide of compound interest back in your favour.