Taking the PPI - how credit card companies take your wallet for a ride

It’s January Sales’ time and the world of finance is never one to be left out, with banks bringing out their 0% deals once more to entice consumers to take on fresh credit. However, attractive packaging can often hide a multitude of ‘nasties’, says Moneyextra.com, which is urging consumers to look at the deals offered by credit card companies more closely.

Here are the areas Moneyextra.com highlights as regularly catching consumers out and how to overcome them:

The small print

How long does the interest-free balance transfer period last for? Remember the longer the interest-free period, the higher the go-to rate will be, so look for one that will give you the greatest chance of clearing your balance or be prepared to switch again!

What is the fee for transferring your balance? Consider a card that’s waived a balance transfer fee (such as Yorkshire Bank) or a card that caps its transfer fee (think Morgan-Stanley, whose ‘buy & fly’ card is capped at £50).

Is the 0% offering better for you in the long-term, or would a low lifetime rate actually cost you less? Do the math before you apply and save yourself a whole load of hassle as well as money!

Payment Protection Insurance

Possibly as useful as the proverbial ‘chocolate teapot’, these policies may be hedged with clauses that mean you can never make a claim…

Section 75 of the Consumer Credit Act provides a limited amount of protection for you and your purchases (comparable to the PPI offered by the card issuer) and it’s free! This rule gives you a legal right to a refund on UK and overseas transactions worth between £100-£30,000 should the goods be sub-standard or fail to arrive.

Oh and finally, taking the PPI shouldn’t be a requirement for you to actually get the card.

To purchase or not to purchase?

Never, ever, make a purchase with a card that you’ve used for balance transfers. Too many card issuers will deduct your monthly payments off the balance with the lowest interest rate first. Any purchases will attract a much higher interest rate which will continue to accrue until the transferred balance is cleared!

Robin Amlôt, Senior Editor at Moneyextra says “Make sure you know what your new credit card will cost. Plastic can be very powerful but beware it doesn’t turn round and bite you!

“The days when you could pick a card, any card and hop from one cheap introductory deal to another have gone. It’s now more important than ever to do your homework to make sure the plastic in your wallet matches your lifestyle needs and spending patterns.”