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This article reveals the truth about how banks allocate the monthly repayment in the bank’s interest by establishing a hierarchy predicated on the various interest rates they charge, so that holders of cashback credit cards will always be punished, whatever action they take. It also shows why it is important to renew your plastic once the opening cashback credit card offer time finishes.

A leading finance lender lately started a television campaign which made great play about the awful truth that a large majority of card suppliers split up usage habits into various categories then allocated a different interest rate depending on which category was taken into consideration. These different levels were based upon the perceived spending models of the average credit card holder. Such people include holders of cashback credit cards.

If you go by the advert, a large majority of credit card companies presume that the card user will start by transferring the balance from a previous card (thereby wiping the balance out) for an average period of 39 weeks. This will be at zero percent interest rate for that time. The credit card owner will then make a new purchase using his or her plastic which will on average draw an interest rate of approximately 15%.

The card user may also use the cashback credit card for getting some ready cash. Your interest rate for cash is set higher than the rate charged for purchases, and this is on average between 19% and 21% but which might reach as high as 23 percent or over.

Now here’s where the trickery starts. As the monthly payment comes around, the cashback credit card lender will ensure the less costly purchase items are at the head of the list when the time comes to pay the minimum, or whatever proportion of repayment has been decided by the card holder.

Thus the most expensive parts of your credit card usage – and that’s usually the cash component – is put right at the back where it will rack up more interest, and where all that interest will be further compounded when interest is charged to the existing interest (we all know how it works, don’t we?)

The cashback credit card user may believe that they are clearing things in a uniform manner, and that if one type of cash attracts a higher interest rate then that will be balanced out by the goods purchase which will be charged out at a lower interest rate. The reality is very different. Because the bank will always put the less costly portion first in the paying hierarchy, and allow the more expensive parts to just sit there accruing interest.

These higher interest rate segments will thus always be the last to be paid. In the average case, for the first 9 months of this cashback credit card all the repayments will be used to pay the zero interest portion while the new purchase and the cash component remain clocking up interest.

More importantly, the more expensive parts will always be at the back, always being paid off last. Last to go will be that cash advance, with its massive 21% or whatever it is. It is ironic to think that the longer the 0 interest period, the longer the interest will rack up! Then when you add on the fee that most cashback credit cards nowadays charge for making that balance transfer, then you know why the credit card companies are making so much money.

The only credible solution is to dump the cashback credit card and transfer the balance to a new card when the interest free period ends. Based on what we’ve seen the banks do as a matter of course, that really is the only option. No exceptions.

An excellent free service which does all the above is the Credit Card Balance Transfers site in the States and the similar Credit Card Balance Transfers UK site in Britain.

The best online credit card sites have become difficult to find. It’s not that they aren’t there; it’s just that there are so many offering the same thing. Just do a search on your search engine of choice for your particular requirements and you will be rewarded with an abundance of riches. But which of these online credit card sites actually offer the best to you, the potential customer, in terms of service?

The figures almost defy belief. In the United States alone there are currently 641 million credit cards in circulation at the present moment, with 186 million people holding credit cards right now (source: pbs.org) accounting for a staggering  $1.5 trillion worth of consumer spending. The best online credit card sites will be responsible for the majority of these, because these will be the major sites for the banks and the credit lenders themselves.

Search for “online credit cards” (i.e. with quotes and therefore looking for that exact phrase) on Google and, at the time of writing, you will be presented with a choice of  556,000 pages on the subject. This is information overload at its most vehement. To filter that down to the best online credit card sites you would need to apply your own special criteria for choice.

But what of the other sites, the sites not owned by the banks or the major lenders? Surely there are other places which offer a Value Added service in addition to the same old “Click Here For A Credit Card” sales patter? Search engines like Google are in the process of helping you out here, because their procedures are seen to be increasingly filtering out duplicate content from the search results in their system. In the medium to long term this will, hopefully, increase diversity and choice for the consumer. It will mean that locating the best online credit card sites will become easier.

This Value Added aspect of the best online credit card sites would probably use a service or technology designed for the Internet. What more appropriate reason to apply for a credit card from the Web than to be able to harness the power of the Web to automate certain features of credit card usage. For example, being able to look at your account online, or be able to order new credit cards or even to make balance transfers to new cards when your present 0 APR period is due to expire. Or what about some other service which can actually save us money? After all, the banks and other lenders are always keen on taking money from us; it would be nice if we found a way of keeping more money for ourselves.

The Internet is about using technology to make our lives easier, not more complicated. One day, when the search engines have filtered out uniformity and the same old sales messages, the best online credit card sites will be the ones that harness that technology to make our use of credit cards and other financial products easier, safer and less costly.

In particular, the Credit Card Balance Transfers site in the U.S. and the Credit Card Balance Transfers site in the U.K. will save you thousands over the years, and both services are completely free to use.

Credit card balance transfers are one of the financial world’s great empowering features, but they can only be done successfully if you follow the rules and don’t fall foul of them. Firstly you must consider the benefits, then the pitfalls. These two aspects are more or less permanent features of the credit card balance transfer system.

The benefits can be summarised as the product of a twofold strategy:

You can transfer credit card balances once the initial interest free period is up to another card, and so continue your interest free credit.

You can more or less plan to do this in advance as long as you have a way of finding new cards to transfer to, and you stay in control of your finances and spending.

Taking these two together – the transfers and the planning – you can aim to give yourself interest free credit for a long time, even interest free credit for years.

The pitfalls are as follows, and must be considered carefully. These are:

Overshooting the Interest Free period

This is a crucial and fundamental issue. There is no point taking out a card with a known zero interest period or low interest period if you just go and breach that time period. Check the date that the interest free allotment ends, and then backtrack by about ten days before then. Ten days is about the right time to apply for a new card. Remember that the application itself will take time, and that this time will vary from card to card. Take into account seasonal changes in the speed and effectiveness of the mail delivery. In the run up to Christmas, for example, it would be wise to allow two weeks.

Minimum Repayment Obligations

Remember to check on what your agreed monthly repayment arrangements are. You may have to pay back a certain percentage (three percent or more, depending on the card) or risk incurring minimum payment fees. This is true even if it occurs within the interest free period, as the credit card provider will want to know that you can at least maintain a minimum repayment to justify the confidence in you when you originally signed up. On some cards, however, such an arrangement may not apply.

Late Payment Obligations

Much the same as above, but this time the emphasis is on paying within a certain time per month. Again, the card issuer may want some kind of assurance that money will be repaid even though interest is not being charged. There will be an extra fee charged if your payment is late, and for small balances this may well be proportionally higher than the interest which would otherwise have been payable (if the charge is a lump sum, as is usually the case). If this arrangement exists, then the best policy is to pay the minimum the same day as you get the statement.

Annual Fees

Remember to check the small print before you apply for the card. This may include information about an annual fee, which is the fee that the issuer will charge you every year for using their credit card. By no means all credit cards have an annual fee, but you must remember to build this in to the total cost of using the card. Things like annual fees tend to muddy the APR figures, which would otherwise give a good indication of how much your credit card actually costs. It is therefore an important factor to consider when deciding which credit card is the right one for you.

Exceeding Your Credit Limit

Whatever you do, don’t exceed the credit limit that you agreed and signed up for at the time you applied for the card. If you do this then you will probably be charged (depending on the card supplier) a percentage or a flat fee. This would be particularly reckless, as it would go against everything that you set out to do in the first place, namely to gain a fixed amount of credit without paying any interest on it!

Of the above five negative factors to be considered, it is always best to think of them all together, as each of them may impact in different proportions depending on the credit card and lender. For example, one card may not charge annual fees, but will come down very heavy on late payment charges; while another card will be lenient about an overextended credit limit but will offset this with a fixed annual charge.

It is possible to meet the criteria of the first two positive benefits, as well as avoid all the pitfalls by careful timing. As long as you transfer your credit card balances in a timely fashion, and observe the rules of the transfer itself, you cannot go wrong. Always remember that there are more credit cards out there to transfer your balances to.

0 APR credit cards are here to stay. Now that we’re well into the New Year we’ve learned (again) the lessons of the festive season. Zero interest credit is a nice idea, but why not extend it beyond your present credit card to the next, and the next. This seven point checklist will assure the clever consumer of having that constant low APR credit for years to come.

1. Read the small print. Make sure it matches the offers on the credit card’s advertising copy. In particular, check for clauses that differentiate between purchases and cash transfers, or even cash withdrawals. Check that the card doesn’t stipulate a ratio between purchases and cash, charging an excess if the cash activity rises above the purchase activity (that is usually the way it is biased, but check to make sure).

2. Keep to the agreed credit limit as specified in the agreement. Do not exceed the balance limit as specified on your original agreement, or that’ll be the trigger for extra charges.

3. Pay at least the minimum charge in full. Even better, set up a standing order or direct debit with your bank. You can arrange to have the minimum paid directly and electronically from your bank account every month.

4. Avoid late fees by paying on time. There is a danger with people who have the benefit of a 0% APR credit card that they will tend to become complacent about it and forget to pay it. Yes, it does happen. But every time a payment is received late credit card providers can and will charge a late fee. This can add up, especially if someone is habitually late. Again, an automatic direct debit from your bank account is the best answer.

5. Factor in any extras in the agreement, as stated in the small print (which you will have read). For example, an annual charge may be applied to offset the 0 APR. Some 0% APR cards do this but others do not. Bear in mind that the whole APR concept was meant to level the playing field as far as extra charges were concerned. By paying an annual charge for your card you are not truly getting a 0 APR card.

6. Make sure you have in mind a new low interest or 0 APR credit card waiting by to which you can transfer the balance of your present credit card. Why have 0 APR credit for 6 months or 12 months when you can have it for years and years? Always check the press and financial columns for new deals and credit card offers with this in mind. Join an Internet forum that specialises in such matters.

7. Make sure that you transfer the balance of your existing credit card to your new credit card in full and on time. In particular, allow for time to process the balance transfer and for all the paperwork involved (yes, even in the age of the Internet there is still a certain amount of paper involved!) and be careful to check that the opening balance allowed on your new 0 APR credit card is at least the same or exceeds the balance that you wish to transfer from your existing credit card, or the shortfall will cost you money!

The interest rate that a person has to pay if he or she carries a balance on his or her credit card from month to month is known as the annual percentage rate, or APR for short.  With credit cards, the lower the rate the better, because that means that less money has to be paid in interest.  Special kinds of account known as 0 APR credit cards have a 0% annual percentage rate during the introductory period.  This allows a person to use this without having to worry about interest until later.

If a person has a lot of debt built up on his or her other cards, then he or she can use 0 APR credit cards to help cut down on the costs as they are paid off.  However, the 0% annual percentage rate only lasts during the introductory period, between six months to a year.  Few issuers offer the 0% annual percentage rate over a year, and even then, it usually only lasts as long as fifteen months maximum.

Whenever a person carries balance on a credit card from month to month, it is subject to an interest rate.  If a person does not pay the balance off as soon as possible, then paying it off later will be much more expensive.  Interest has a habit of adding up very quickly over time.  With 0 APR credit cards, interest does not build up during the introductory period, which may be between six months to a year.

When the introductory period of 0 APR credit cards passes whatever the limit it has been set at, the account assumes a normal annual percentage rate.  This is usually fairly high compared to normal accounts: between 15% and 20%.  Therefore, if a person wants to use a card that has a 0% annual percentage rate, it should only be used during the introductory period, otherwise it will be subject to the normal annual rate.

Whenever a person does not pay off the balance on an account it will build up interest over time.  With 0 APR credit cards, however, the interest will not build up for a few months until the introductory period is over.  This period can last between six months to a full year.  Transferring balances or making large purchases early are two of the uses of an account with a 0% annual percentage rate.

Who wouldn’t want interest free credit for years and years? In theory that’s possible. You just ensure you sign up for a 0 interest credit card balance transfer every time your 0 interest period expires. But is your bank ever going to actually tell you when the expiry date comes round? Usually not, except in the small print.  The 0 balance transfer credit card is not something the banks and credit card companies like reminding people of.

But all that is about to change. Technology can do a lot to simplify the way we handle our interest free balance transfer credit card accounts. If only we could remember exactly when the 0 interest balance transfer credit card period is about to elapse we could ensure 0 interest, free credit card use for a long time.

That’s where the Internet’s new Credit Card Balance Transfer Alert service comes in. Whenever a customer orders a credit card from this site they can send off what is known as an autoresponder. This will then tell the customer when the interest free period is due to expire. An email will arrive a week or so before the zero interest credit card time is up, thus allowing enough time for a 0 interest balance transfer to a fresh account.

This could be a 6 month interest free credit card or a 9 month interest free card. In some cases there also exist 12 month interest free credit cards where the balance transfer can take place over just a few days.

CEO Gordon Goodfellow says ‘We already have hundreds of very satisfied customers on our credit card balance transfer alert service. People seem to like the simplicity of it. Who among us can remember a specific date just like that?  In effect it means that our customers never have to pay for even one day’s interest being charged. It’s like having a 0 APR credit card for as many years as there are transfer offers.

‘Our records are updated electronically every time a new credit card with 0 APR offer comes along, so nobody misses out. The website gets data directly from the card providers to our customers.’

Best of all, the Credit Card Balance Transfer Alert Service is completely free.

The 7 Rules of Credit Card Balance Transfer

Credit card balance transfers are a great way of consolidating your credit card debt, and also finding a way of avoiding the terrible burden that debt can bring. Transfer offers are in high demand and many credit card issuers highlight their balance transfer features up front as part of their overall advertising package. These days the credit card companies are in heavy competition with each other to get your business.

But have you ever considered the dream ticket of always having an interest free credit card at  all times, no matter what the circumstances? Well here is a check list of seven things you must do in order to get the best out of it.

1. Always make sure that your credit card balance transfers are carried out on time and with no overlap periods from one card to the next, which will cost you money in nasty interest charges. Make allowances for delays in the post when  notifying banks and credit card companies by mail, and also note that different banks will move at different speeds when responding to requests.

2. Make sure that 0 balance transfer credit card offers are always current and available at the time you apply. There’s no point in making a mental note of an offer and then applying for it after it has expired.

3. Interest free balance transfer credit cards must be exactly that; be careful and look out for any hidden charges in the small print. A 0 APR credit card should be exactly what it says it is.

4. The type of card to transfer balances from is crucial. Store cards tend to have a higher rate of APR than normal credit cards, so consider transferring all these balances on one or more low interest card. You can end up saving a substantial amount of money. Proper use of the credit card balance transfer feature can be useful and convenient, and a vital way of avoiding credit card debt.

5. Trust your source. A low interest credit card or 0 interest credit card should be easy to identify, preferably from a source where you are able to make comparisons between different types of card. Ideally you should deal with a source which is impartial and which does not promote one credit card or bank over another. Also, your source should provide easy to read and understand comparative charts to help you make such decisions swiftly, without undue pressure, and without any fear of being misled.

6. Keep a note of the exact date of when your 0 interest period finishes, and apply for your new credit card balance transfer at least two weeks before that date.

7. Try and ensure that your interest free credit card balance transfer facility is flexible and quick. At present it is the norm to put details of your credit balance transfers in writing at the time of application. Bear in mind that both parties need to know what is going on at the same time. Make it easy for everyone, including yourself.