Query re:credit card

masterboy123

Hi all,

What's the benefit of having a credit card?
I am using debit card for several years now but my friends told me credit card is a better option in long term, but i am not sure in what way is credit card better than debit card?

Also, is there monthly or annual fee on credit card? I am AIB customer.

Thanks

galwayjohn89

Fee is €30 a year stamp duty due each April. Some cards have an additional fee but most common ones don't.

Interest free period can be very beneficial especially if you plan it well. Credit cards can also offer rewards for example the Tesco club card. They're handy for car rental/hotel deposits. Also cheaper abroad then debit cards in some cases

hfallada

A credit card can work out cheaper than a debit card if you have a bank that has fees per transaction. If you use your CC and clear it at the end of the month, it should cost you nothing than the stamp duty fee. But you have to make sure you never ever withdraw cash on it as it incurs a fee usually and a massive interest rate

DMcL1971

With a debit card you actually have to have the money in your account before you can buy anything on your card and you cannot spend more than your current account balance. With a credit card you can spend more money than you actually have in your account, you are essentially borrowing money from the credit card company. If you pay all this money back each month then this borrowing will cost you nothing. If you do not pay back the full amount each month then the credit card company charge you interest on this loan and the costs start to add up quickly.

Seeing as how you have been using a debit card for several years, it suggests that you don't overspend and therefore have no need to use the extra credit facility that the card would allow you. You would probably pay off the card in full every month. In that case there is no advantage in a credit card over a debit card and it might be good idea not to tempt yourself to overspend with a credit card.

In short, you cannot get your self into trouble with a debit card. If you get a credit card and pay off the full balance every month you won't have any trouble either. But if you get a credit card and don't clear the balance in full every month you start to pay high interest charges on your purchases and that is not a good thing.

However a credit card might be handy if you ever needed to spend more than was in your current account but you knew you would have the money by the time the credit card bill comes due. It may be helpful to have had a credit card if you are looking for a mortgage. It shows a bank that you are able to regularly borrow money and be trusted to pay it back. I have heard tell of some websites that will accept credit cards but will not accept debit cards, though I haven't come across that problem myself.

masterboy123

All right. So it looks like credit card is for actually borrowing money from bank and it has to be paid every month back to bank, or else pay the interest rate.

Yes i never overspend, so i think i am good with debit card at the moment.

Thanks everyone for the help. cheers

DMcL1971

When I was young my Mum gave me one piece of financial advice and it has stood be in good stead.

"You can borrow to buy a house or a car but for everything else you have to save up."

Nervous Wreck

DMcL1971 wrote: »

When I was young my Mum gave me one piece of financial advice and it has stood be in good stead.

"You can borrow to buy a house or a car but for everything else you have to save up."

Sterling advice.

hfallada

Even Warren Buffets company owns shares in most US banks and American Express and this is what he says about credit cards

"I tell every student class I get, high school students, university students, you know, they'd be better off if they never used credit cards now. Now if you use them and you pay at the end of the month so you don't start revolving, that's another question. But I can't make money if I'm out borrowing, you know, at whatever the rate may be — 12 percent, 14 percent, 16 percent . . . I think if credit cards didn't exist, I think probably the economy would be better off."

galwayjohn89

One think that really does my head in is people giving out to me for using a credit card. Yes some people can't control their finances and shouldn't have card. I'm 21 student and have a 6k limit. People seemed appalled when I tell them and start lecturing me how much it's costing me and how it's dangerous. Having the card has saved me on so many occasions, saved me money abroad and ice earnt Tesco points on one of them. There are so many times I'd have been snookered without a credit card.

coylemj

A credit card is useful when renting a car, going on a cruise or staying in a hotel because what happens is that they reserve an amount of money off your credit limit to cover possible charges i.e. in case you do a runner from the hotel or bring the rented car back damaged. You don't actually see this as a charge (it won't appear on your statement) and when the transaction is completed the money is unlocked but it is never debited from your account.

Using a debit card in the same situations, they often actually debit the money from your account so you are temporarily at the loss of the money and if you have a low balance or overdraft limit, this can affect the amount of money you have to spend on holidays whereas with the credit card, you are not at the loss of any real money.

masterboy123

Yea actually I am going to stay in a hotel in Dublin next week, i confirmed from the hotel today whether i need to deposit some caution amount, since the hotel is already prepaid. They told me no deposit is required. I hope they don't change this when I arrive at the hotel.

coylemj

masterboy123 wrote: »

Yea actually I am going to stay in a hotel in Dublin next week, i confirmed from the hotel today whether i need to deposit some caution amount, since the hotel is already prepaid. They told me no deposit is required. I hope they don't change this when I arrive at the hotel.

It just means that they won't give you a guest card to charge stuff to your room in the bar or restaurant and it probably means there's no minibar in the rooms or if there is, yours will be either locked or empty. They'll probably also block the phone in the room from making external calls.

masterboy123

lets see on thursday.

coylemj wrote: »

It just means that they won't give you a guest card to charge stuff to your room in the bar or restaurant and it probably means there's no minibar in the rooms or if there is, yours will be either locked or empty. They'll probably also block the phone in the room from making external calls.

Ah-Watch

I have an AIB MasterCard and was wondering is there any difference in this:

I use my card and let's say I spent €1000 a month on it but knowing the statement itself would be generated on lets say the 10th which would show I owe AIB that amount, would you earn a credit rating even if I clears the €1000 on the 8th before the statement would be generated or would it be better to wait to have the statement generated saying I owe them €1000 and pay it immediately or is it all the one that it makes no difference as long as it's paid by the due date?


Reason I ask is although my cc balance is set to be paid by direct debit I do always pay it all off before the statement is even generated but I do want to build a credit rating at the same time- I just like to see on my online banking I don't owe them anything and the balance as €0.00

Sorry if the post is confusing

coylemj

Ah-Watch wrote: »

Reason I ask is although my cc balance is set to be paid by direct debit I do always pay it all off before the statement is even generated but I do want to build a credit rating at the same time- I just like to see on my online banking I don't owe them anything and the balance as €0.00

No benefit to paying it early, you will earn a black mark if there's continuously balances being carried forward (shows you can't manage credit and are being fleeced by high interest rates) but paying it off every month is fine.

It doesn't matter at a specific point in time if there's a balance, as long as you have a history of clearing the balance every month. This is why I'm sceptical about newspaper headlines about the amount of money people owe on credit cards, as if we were all feckless eejits living beyond our means. I use a credit card whenever I can in order to get extended credit but I pay them the full balance every month.

murphaph

coylemj wrote: »

No benefit to paying it early, you will earn a black mark if there's continuously balances being carried forward (shows you can't manage credit and are being fleeced by high interest rates) but paying it off every month is fine.

It doesn't matter at a specific point in time if there's a balance, as long as you have a history of clearing the balance every month. This is why I'm sceptical about newspaper headlines about the amount of money people owe on credit cards, as if we were all feckless eejits living beyond our means. I use a credit card whenever I can in order to get extended credit but I pay them the full balance every month.

Yeah me too. My German CC is basically a charge card...full amount is drawn by DD on the 22nd every month (same for all customers of the bank). I always use my Irish CC for purchases because the statement is generated on the 5th of each month and the due date is the last day of the month, so a purchase made on the 6th of April doesn't have to be paid for until the 31st of May, almost a full 2 months credit. I always clear the balance but why not use the free credit and make a few cents interest on the money in your bank account (doesn't apply to most Irish current accounts but PTSB pay interest on theirs AFAIK).

It's all about managing your finances and not being an idiot with any credit extended. We're going to be building a house next year and will require new furniture. I fully intend to max out any interest free offers from Sofa companies etc. (as long as I can repay them in the time frame of the interest free period).

fire_man

I have a BOI CC with limit of 1k. I have the card maxed out.Every month I pay 3-4 hundred off it but use this again before get paid again .Should I transfer €1k of my wages to CC each month and then use CC to pay bills etc?thanks

coylemj

fire_man wrote: »

I have a BOI CC with limit of 1k. I have the card maxed out.Every month I pay 3-4 hundred off it but use this again before get paid again .Should I transfer €1k of my wages to CC each month and then use CC to pay bills etc?thanks

In keeping the CC permanently in the red you are building up a very bad credit record which will operate against you if you go for a car loan or mortgage even though the numbers are not very big. Ask your bank for a 1K overdraft facility and use that as a much cheaper form of credit but they will expect you to get the account in the black at least once a year and possibly more often. Do not use the CC for anything that you can't afford to pay off in full by the due date.

fire_man

Thanks for reply,Should i cancel CC and pay it off over couple of months?

coylemj

fire_man wrote: »

Thanks for reply,Should i cancel CC and pay it off over couple of months?

If you can't resist the temptation to continuously spend up to the limit then I would say 'yes'. Cut the card in two, throw it in the bin, pay off the balance as quickly as you can and then close the account.

1234fakest

Fire man, best thing to do is try and clear it down to zero and keep it for emergencies. If this doesn't work out then you should probably get the limit reduced or close the account. For now, if you can clear it in full every month (albeit dipping back in by the end of the month) than this is the cheapest option as you will pay no interest.

coylemj wrote: »

In keeping the CC permanently in the red you are building up a very bad credit record which will operate against you if you go for a car loan or mortgage even though the numbers are not very big. Ask your bank for a 1K overdraft facility and use that as a much cheaper form of credit but they will expect you to get the account in the black at least once a year and possibly more often. Do not use the CC for anything that you can't afford to pay off in full by the due date.

Having a cc in the red doesn't affect your credit rating unless you are missing the minimum payment. Your credit rating will just keep a record of the balance at the time of you requested a copy of your ICB, the total limit of the credit card and simply a record of whether a payment was made/missed. It you were going for a mortgage the balance should be cleared beforehand but otherwise its completely fine.

Also you pay interest daily on an overdraft as soon as you are overdrawn. If the poster pays his full credit card balance off every month he pays absolutely no interest. An overdraft would be far more expensive than this option especially 1k at 10-14%.

coylemj

1234fakest wrote: »

Also you pay interest daily on an overdraft as soon as you are overdrawn. If the poster pays his full credit card balance off every month he pays absolutely no interest. An overdraft would be far more expensive than this option especially 1k at 10-14%.

I'm aware of how an overdraft works. What I was saying to fire_man is that an overdraft is a cheaper form of credit than a CC. He was paying 300-400 each month off his maxed out CC balance of 1K meaning that he was carrying forward a balance of the order of 600-700 and paying CC interest on this balance, an overdraft would be a considerably cheaper form of credit.

Obviously paying the CC balance in full is the best option, an overdraft facility is the second best option if he cannot clear the balance in full each month.

masterboy123

Couldn't find proper credit card from AIB yet for myself, which has the minimum annual fee and no transaction fees, can anyone please suggest me which would suit my needs?
i will pay every month on time, monthly expenses about 1200 euros.

DMcL1971

masterboy123 wrote: »

Couldn't find proper credit card from AIB yet for myself, which has the minimum annual fee and no transaction fees, can anyone please suggest me which would suit my needs?
i will pay every month on time, monthly expenses about 1200 euros.

I'm not sure what you mean by minimum annual fee or transaction fees?

The main differences between credit cards is the amount of interest they will charge you when your balance is not paid off in full. If you clear your balance in full every month on time, then you will never pay them any interest. That would mean that the only cost you could incur would be the annual government stamp duty of €30 which cannot be avoided.

DMcL1971

masterboy123 wrote: »

Couldn't find proper credit card from AIB yet for myself, which has the minimum annual fee and no transaction fees, can anyone please suggest me which would suit my needs?
i will pay every month on time, monthly expenses about 1200 euros.

Are you mixing up a current account with a credit card account?

Your AIB current account has annual maintenance fees and transaction fees which you may not be able to avoid. That account automatically comes with a debit card attached to the account. A credit card is a different stand alone product that AIB can provide to you. If you want to avoid the fees you need to move your current account to another bank.

masterboy123

Hi,
There is no maintenance fees and transaction fees on AIB current account if your account always have 2500 euros as balance.

Is it possible to get credit card on current account?
So 30 euro is the annual fee, any other hidden charges? Given i would pay every month on time.

DMcL1971 wrote: »

Are you mixing up a current account with a credit card account?

Your AIB current account has annual maintenance fees and transaction fees which you may not be able to avoid. That account automatically comes with a debit card attached to the account. A credit card is a different stand alone product that AIB can provide to you. If you want to avoid the fees you need to move your current account to another bank.

DMcL1971

If you have a current account and you want to get a credit card, then all you have to do is look on their website at the different credit cards they offer, choose the one that suits you and apply for it. Because what you are applying for, technically, is a credit line with the bank they will need further information in relation to your salary and any debts you have etc. to decide if they are willing to give you a credit card. They will also decide the limit on the card.

You will still have a debit/ATM card on your current account but will then also have a credit card.

The €30 government stamp duty is the only charge on the credit card. If you pay off your balance in full on time and never use it to withdraw cash then you will not pay another penny.

Feel free to PM me if you want.

masterboy123

Thanks for clarification.
Things are getting clear for me now.

How much would it cost if I withdraw money from ATM machine using credit card?

DMcL1971 wrote: »

If you have a current account and you want to get a credit card, then all you have to do is look on their website at the different credit cards they offer, choose the one that suits you and apply for it. Because what you are applying for, technically, is a credit line with the bank they will need further information in relation to your salary and any debts you have etc. to decide if they are willing to give you a credit card. They will also decide the limit on the card.

You will still have a debit/ATM card on your current account but will then also have a credit card.

The €30 government stamp duty is the only charge on the credit card. If you pay off your balance in full on time and never use it to withdraw cash then you will not pay another penny.

Feel free to PM me if you want.

DMcL1971

masterboy123 wrote: »

How much would it cost if I withdraw money from ATM machine using credit card?

The short answer is 'never use your credit card to withdraw cash'.

It depends on the card type but with the most basic AIB credit card it would be 1.5% of the transaction value or €1.90 whichever is greater. In other words at least 1.90 per withdrawal.

DMcL1971

DMcL1971 wrote: »

The short answer is 'never use your credit card to withdraw cash'.

It depends on the card type but with the most basic AIB credit card it would be 1.5% of the transaction value or €1.90 whichever is greater. In other words at least 1.90 per withdrawal.

I forgot to mention you will also be charged interest on your cash withdrawal at a rate of 19.68%. So definitely don't do it.

wmpdd3

once you pay in full by the pay date, there are no other fees.

you cannot have a positive balance on the aib card as far as I can remember.

DMcL1971

Unlike a debt card your credit card is not associated with your current account balance. So if you take money out of an ATM using it you are not withdrawing your own money, you are borrowing that money from the credit card provider.

coylemj

DMcL1971 wrote: »

Unlike a debt card your credit card is not associated with your current account balance. So if you take money out of an ATM using it you are not withdrawing your own money, you are borrowing that money from the credit card provider.

Unless you shoved some money into the account in advance in which case you are withdrawing your own money - a handy way of avoiding charges when travelling abroad.

masterboy123

Ok things are very clear to me now.

One last question, can I use the credit card in stores like Aldi, Tesco without paying extra fees? Also online for buying things from ebay, amazon? or to pay to a hotel or car rental company?

Thank you very much!!

DMcL1971 wrote: »

The short answer is 'never use your credit card to withdraw cash'.

It depends on the card type but with the most basic AIB credit card it would be 1.5% of the transaction value or €1.90 whichever is greater. In other words at least 1.90 per withdrawal.

DMcL1971

masterboy123 wrote: »

Ok things are very clear to me now.

One last question, can I use the credit card in stores like Aldi, Tesco without paying extra fees? Also online for buying things from ebay, amazon? or to pay to a hotel or car rental company?

Thank you very much!!

Yes credit cards are accepted nearly everywhere. In fact they are accepted in more places than debit cards. Before debit cards they were the only way to make any online purchase. I am not sure, but I believe some shops have a minimum spend before allowing you to use a credit card.

You keep on asking about fees, there are no extra fees!! Only annual government stamp duty and interest if you do not pay in full. There is no individual transaction fee and no fee for use. Like with all bank services there are penalty fees for misuse of the card such as spending more than your limit or having a lost card replaced. But you can use the card as much as you like, up to your monthly spending limit, and providing you pay it off in full it will never cost you anything other than the €30 per year.

BazzaDP

The exception being cash withdrawals. Cash withdrawals on a credit card have an immeadiate fee as mentioned above and also usually start charging interest immediately. So even if you pay off the full balance by the end of the month that balance will be more than just the money you withdrew.

However if you use your credit card only to make purchases and pay it off in full at the end of the month you will not pay any fees and there may be some other benefits (club card points, air miles, consumer protection...etc.).

However if you haven't the discipline/funds to pay off in full or want to use it for cash withdrawals then a credit card is usually a bad idea.

murphaph

coylemj wrote: »

Unless you shoved some money into the account in advance in which case you are withdrawing your own money - a handy way of avoiding charges when travelling abroad.

Be very careful doing this! Many CC companies craft the small print so that they have no liability for fraudulent use if the card account is in credit. Loading a couple of grand on the card can be very risky because of this (sneaky) practice.

masterboy123

wwoohhhh, thanks for this great advice.

murphaph wrote: »

Be very careful doing this! Many CC companies craft the small print so that they have no liability for fraudulent use if the card account is in credit. Loading a couple of grand on the card can be very risky because of this (sneaky) practice.