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Credit Cards

What are the Differences Between a Store Card and a Credit Card?

Store cards and credit cards are quite similar and it can sometimes even be difficult to see what the differences are between them, if indeed there are any. They do all differ depending on who issued them and so there are not definite features for one, rather than the other in most cases. However, there are some main differences which it is worth knowing about so that you can choose which, if any, is the best for you to pick to use.

What is a store card?

A store card is issued by a specific store ad will allow you to shop at that store using it rather than cash or other methods of payment. The card is usually exclusive to that store and so can only be used at that store or any other branches of it and perhaps also any parent or sister stores or ones owned by the same parent company.

The way that a store card works is that you will be allowed to use it to purchase items from the shop rather than using cash, debit card or credit card up to a certain limit. You will not have to pay any money until you get your store card bill, which could take up to a month to arrive. Then you will have a number of weeks before you have to pay. You will have the choice of paying an instalment, which is normally the interest charged on the borrowing plus a little extra or the whole balance without any interest charge. Whichever payment you choose, you will have to pay it by a certain date. If you choose to pay off everything your spent, then there will be no charge, so you will get interest free credit. However, if you only pay the minimum, you will be charged interest and the amount of interest charged will vary depending on the interest rate on the card. These vary between store cards and tend to be a bit higher than credit cards. They are also variable which means that they can change at any time but will be certain to go up if the base rate increases, although will not go down if the base rate falls.

The advantage to having a store card compared with a credit card is that they may offer you additional benefits with the retailer. You may be able to get discounts, invitations to sale evenings, loyalty points and things like that. These incentives will change depending on the store and so it is worth finding out what they are before you sign up to one. Some may be more appealing to you than others.

What is a credit card?

A credit card is issued by a bank or building society. It will allow you to spend up to a certain amount of money and not pay for it. The card works like money and so you can buy things in most shops and online using it. You will not have to pay anything until you get the bill. The bill will allow you to either pay a minimum amount; which normally covers the interest and a little more or pay off the whole outstanding balance. If you pay off everything then there are no charges, but if you choose to only pay off some of the balance, then you will be charged interest on what you do not pay back.

Most shops accept the major credit cards and this means that you just need the one card to shop at lots of places. It can be a great alternative to carrying cash and means that you can buy things right away and not pay for them until the bill arrives weeks later. It can be a great help if you are running out of money as you may not have to cover the bill until you next get paid. There is no pressure to pay back more than the minimum and so you can take a long as you like to repay it, although the longer you leave it; the more expensive it will be.

Which is the best?

Choosing between a credit card and a store card can be hard. It may seem obvious that choosing a card that you can use in most shops and that is cheaper is the best but there may be benefits to holding a store card, such as money off offers which could be more valuable. If you plan on paying off the full balance to avoid the interest payments, then it will make no difference which card you pick with regards to the cost.

It is worth thinking about the fact that a store card could be limiting because you will only be able to use it in one store, whereas a credit card can be used almost anywhere. This means that you may end shopping more at the shop that you have the store card for and it could limit your choice and if the store is expensive compared to others, may even lead to you spending more than necessary on items that you are buying. However, if there are lots of offers associated with using the store card and it is for a sop that you use a lot, as long as you are not tempted to spend extras due to the offers, you could gain a lot form having the card.

Of course, you may decide to take out both cards; the store card to use at your favourite shop and take advantage of the deals as well as the credit card to use elsewhere. Just be careful with this option as you have a lot of credit available to you and it could mean that you are at risk of getting into a lot of debt if you do not pay them back quickly and spend a lot of money on them. However, if you set up a direct debit to pay off the cards in full when the bills come in and you keep a close check on your spending with them, you should be able to manage them both.

by admin
Mortgages

Why do Mortgages need Deposits and how much Should you Save?

A mortgage is very different to other types of borrowing because you have to put down a deposit on the home that you are using it to buy first. This deposit normally has to be a percentage of the cost of the home and will therefore vary depending on how much you are borrowing.

Why do you need a deposit?

You may wonder why you need to use a deposit on a mortgage when no other form of borrowing needs this. There are a couple of possible reasons for it. It protects the bank against negative equity. This means that if the house loses value and they sell it because you are not paying the repayments, then they want to make sure they get back as much as they lent you. If they lend you the full value of the home, they will not get it all back because of the costs of selling it as well as the risk of the value dropping, particularly in the short term. The deposit also shows the lender that you are capable of putting away some money each month. They will then be more likely to trust that you will be able to make the monthly repayments. As a mortgage lasts so long and you borrow a huge amount of money, they want to be absolutely certain that you are capable of making the repayments and they will check this in many ways, including making you get together a deposit.

How much to save

Saving for a deposit can be really hard work. If you are paying rent at the same time it can be particularly difficult to find enough money to put away a significant amount every month. However, if you do want to buy your own home, then you will need to save up enough money to be able to pay a deposit towards it.

It is worth starting by investigating the houses in the area that you would like to buy and their prices. Think about whether you need a certain amount of rooms, to be near public transport, whether you need parking, garage, garden and things like that. Once you have thought this through you will be able to see how much the houses that fit your criteria cost. You may decide that you want to live in a cheaper area, due to the cost of the houses and decide to investigate there. Once you have decided on the area and the size of home and features you need you will be able to carefully examine the prices and figure out how much you are likely to have to pay. Do take the costs of moving into consideration. Then you will know how much you will need to save as a deposit as you generally need 5% of the asking price as a minimum.

Once you know how much you need to save, then you will be able to decide how much to save each month. House prices tend to go up and so you will need to consider that the longer you take to save; the more money you will need in order to get the 5% deposit that you will need. It can be wise to set up a transfer each month just after you are paid to have some money put into a savings account towards it. This will then not be spent on other things. To calculate how much to transfer, look back at several months of past bank statements and you will see how much money you tend to have left at the end of a month. You can use this amount as a guideline. However, it can be wise to be careful with your spending, particularly on luxury items, so that you have more to save towards a deposit. You could also then pay in anything you have left at the end of the month towards the deposit as well. If you wait to save anything until the end of the month, you may find that you spend too much and leave nothing to save, but if you save first, it will not be there to spend and so you will be more likely to save more money.

The more money you save up, the quicker you will be able to buy your home. If you are really motivated to move, perhaps having already found a place you want to move to or just desperate to get a place of your own, then you will find it easier to save. You will be happy going without things because you will know that you will be able to get a house as a result of it. If you are not so enthusiastic, then you may not be prepared to give up so much for a deposit and may be prepared to wait longer for a home of your own.

A mortgage is a loan and the more that you borrow, the more expensive it will be. This means that if you are able to save up for a larger deposit then you will be able to borrow less money and that will mean that you will not pay so much for the loan. The cost of the loan is calculated as a percentage of what you owe and so the less you borrow; the less you will pay for the loan. You may also be able to pay it back sooner, if you borrow less money and that will save you money in interest as well.

Therefore when you are deciding how much to save it is a good idea to think about how you can save as large a deposit as possible. Then you want to try to save as much money as you can towards it each month. It can mean that you will have to work hard at spending less money and possibly working more in order to earn it too, but it could be worth it if you are paying less in mortgage interest over the next 20-30 years.

by admin
Comparison

How to Compare the Prices of Different Loans

If you start searching for a loan, you will see that they differ in many ways including price. It can be tempting to think that those with the lowest interest rates will be the cheapest and if you use a comparison site that compares on interest rates, this will lead you to the same conclusion. However, this may not be the case as just comparing a percentage does not give you the full story about the loan. While a comparison site can be useful, because it will let you know who has a good rate and who is offering loans, you may not get the cheapest by looking at these. Therefore you need to look beyond this and think about every aspect of the cost of the loan.

Interest rates

The interest rates will show what percentage of the money borrowed is charged in interest. The interest rate might be fixed for the term of the loan or it may be variable and therefore can be changed. Rates tend to change if the base rate is changed, although they will often not go down very quickly after the base rate reduces but may go up quickly if it goes up or even be put up even if rates do not change. Therefore you need to decide whether you would rather have a fixed rate where you know exactly what you will be repaying each month or a variable one where rates might go down but could also go up.

The length of the loan is also very relevant when comparing the cosy of them. If the interest rate is low but you repay over a year it could be dearer than a loan with a higher rate that is repaid over six months. It is therefore important to calculate how much the loan will actually cost you, rather than just comparing the interest rates.

Fees and charges

Loans may have additional fees and charges as well as the interest rate. For example, some may have an administration charge for setting up the loan or something like that. It is really important to find out what these costs are so that you can compare the different loans properly. You may find, for example, that one with a lower interest rate has a higher setup fee and vice versa. If you cannot see what these fees are, when looking at leaflets or on the website, then contact the lender to check. Some may not have fees but some will and so you need to be sure of whether the loans that you are considering do have fees and how much they are.

Overall cost

This means that it is really important to make sure that you are looking at the total costs of the loan. It is best to actually calculate the total amount that you will pay back. Work out how much this will be by looking at the interest rate and the length of the loan and also add in any extra charges or fees. If you find it difficult to work this out then you should be able to contact the lender and ask them to work it out for you and give you the cost. Once you have this figure for a selection of different loans you will be able to compare them and work out which will be the cheapest for you to take out.

Late payment fees

It is also worth checking out any other charges they may have, such as late payment fees. These occur when you miss a repayment for any reason and they can be high. You may be charged a one off fee and you may also be charged interest at a higher rate until you make the payment. It will depend on the type of loan and how it is set up. It is good to find out how the loan that you have is set up, so that you can be sure that you are aware of what will happen if you miss a repayment. You may feel that this will not happen to you and that you will always be able to repay your loan. However, you never know what might happen in the future and the longer the length of the loan, the more chance there is that you will not be able to repay it in the future. It is just worth checking out the rates and thinking about the consequences of not making a payment so that you are aware. It will also allow you to compare the different loans and if they are similar apart from these fees, it will be easier to choose which one is the best for you.

Conclusion

So although we seem to be encouraged to compare loans using their interest rates, it is wise to make sure that you also compare their hidden costs. The admin fees can be really high with some loans and make a significant cost difference to them. With some late repayment fees can be very high and could cause a loan to be significantly costlier than an alternative one. The length of time that you have the loan for is also relevant as the longer you have it for, the more interest you have to pay. Therefore you need to calculate the total costs of the loan for the whole time that you will have it and compare that with other loans so that you can get an idea of what it will cost you in total. This can be time consuming and complex and this is why it can be a better option to use a financial advisor. They may cost you quite a lot of money but they could end up saving you a significant amount which could be worth a lot more than the money that you pay out for them. It can therefore be worth considering this option of it is something that you can afford.

by admin
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