Credit has been with us since the dawn of trade. In the olden days, shops would keep open accounts, or tabs, for their customers. The customers would take the goods they needed, the shopkeeper would mark their purchases in a ledger, and the tab would be paid some time later.

Credit in card form was first documented in literature in the 1887 novel Looking Backward by Edward Bellamy. Bellamy predicted that one day customers would be able to make purchases with a small card which represented their available credit. His prophecy came true in 1914 when Western Union issued purchase cards to its best customers.

Gas cards were an early type of credit card. As more and more people bought cars in the 1920s, those cars needed fuel, so gas stations started to issue cards which could be used to make fuel purchases.

Next were store credit card which were originally designed as a marketing ploy. Store cards helped increase many retailers’ customer bases. Shoppers liked the fact that they could buy now and pay later, and retailers liked the fact that the customer had a specific amount of time in which to pay off their debt. Prompt payers gained a good reputation among merchants – an early form of credit history.

The 1930s and 40s saw the advent of revolving credit. Shops started off by allowing customers to pay off their debt over several months, making sure that the debt was paid in full before further purchases could be made. Then they abolished the repayment limits. This meant that shoppers could carry a balance on their credit card that didn’t have to be repaid in a designated time period. Instead, the customer had to repay a certain amount of debt every month – the minimum monthly payment. This meant even more convenience for customers, but wasn’t necessarily good news, as many weren’t aware that they risked getting into serious debt. Early credit card companies made money from fees and interest, as they do today.

In the 1950s, an all-purpose credit card was invented by Ralph Schneider, which could be used in place of multiple charge cards. This was when visa, American Express, Diner’s Club, and others came into being. Popularity increased throughout the 70s and 80s.

So there you have it – a quick history of those ubiquitous little bits of plastic that so many of us take for granted.

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Skimmers are a potential problem for anyone who owns a credit card. These devices mimic legitimate credit card swipers on chip and pin terminals. When a card is swiped through the reader, the card number, account holder name and address and sometimes the PIN are stored so the thief can access it later. This information is used to make cloned credit card for fraudulent purchases.

Amazingly, credit card skimmers can be bought easily online. Aspiring thieves only have to shell out a couple of hundred pounds and team up with counterfeit credit card makers, and they are well on their way to fleecing innocent card holders.

Credit card skimming costs companies millions of pound each year, so it is a massive problem. The best way to avoid falling prey to credit card skimmers is to make sure that you see all transactions happen in front of your eyes. Don’t let waiters or bar staff take your card out of your sight, and check for anything out of the ordinary when you use an ATM or ticket machine.

Make sure that you check your credit card statement carefully to see if any fraudulent payments have been made. If you notice anything out of the ordinary, report it to your credit card provider immediately.

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Whenever you see credit card promotions that sound like they’re going to be a good deal for you, it’s best to look into them closely and make sure you read all of the small print. A 0% balance transfer is usually good for a specific length of time – normally six or twelve months. If you have several thousand pounds of debt on a higher interest credit card and take advantage of a 0% balance transfer offer for twelve months, the credit card company is betting on you still having a balance once the promotional period ends. When the six or twelve months of no interest repayments end, the balance will start being repaid with interest.

Remember to check what the interest rate will be after the promotion ends. If you’re moving a balance that you are currently paying 9% interest to a card with an interest rate of 19% after the promotional period ends - unless you are able to pay it off completely during the 0% interest period, you are not likely to benefit financially over the long term. You would have to start looking for another 0% balance transfer offer, or pay the higher interest until the balance is paid off.

Another thing to bear in mind is that most credit card companies charge a transfer fee. This can range from 1% to 5% of the amount transferred. There are some cases where the amount you pay for the balance transfer fee will result in more money paid than if you had just kept your balance on the card it was on and paid interest. To ensure you’re actually getting a good deal, you’ll need to play with the numbers and decide how much you’ll spend for the life of the balance if you keep it on the card it’s currently on.

Interest free balance transfer offers are also only good as long as you make your payments on time. This is something to bear in mind if you have difficulty keeping up with your payments, because if you are late you can lose your 0% interest rate and start paying a much higher interest rate.

In order to make balance transfer fees work for you financially, it’s better to find a low interest balance transfer offer that is fixed for the length of the balance. If you can transfer a few thousand pounds from a credit card with 9% interest or higher, to a card with 1.99% or 3.99% fixed interest on the balance transfer for the life of that balance, you will save hundreds of pounds in interest and actually make out better than the 0% offers (provided you know you can’t pay off the entire balance before the 0% offer ends).

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But you’ve still got to be careful. Here are some tips for a smooth journey with your credit card:

Better Safe than Sorry…

Make sure you have your card cancellation phone numbers written down and stowed somewhere about your person when you are travelling. If the worst case scenario happens and your card is stolen, you’ll be able to sort it out as soon as possible.

Spread the Load

If you’re travelling with your partner or family members, it’s a good idea to have your credit card on different accounts. This is because all cards on an account will be cancelled if one is stolen or lost.

Make Note of Your Card Use

Save all your receipts and keep track of where you used your card. You can check these against your credit card statement when you get home to make sure that no suspicious transactions have been made.

Beware of Extra Fees

Lots of banks charge a conversion fee on transactions made abroad, usually 1% of the purchase amount. Make sure you check with your credit card provider before you travel so you won’t get any nasty surprises when you see your statement.

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The brief answer is no.

With Britain in the grip of a credit crunch, households are feeling the pinch and any extra debt is felt more than ever. The main reason for avoiding store cards is the exorbitant interest rates - around 10 to 20% higher than the average credit card. This is okay if you pay off the balance within the interest-free period (usually between 35 and 55 days). As with any credit card, it is the unpaid balance that proves problematic when interest starts to mount.

Taking out store cards may also adversely affect your credit rating, as the more cards you apply for, the worse your rating will be.

Many people fall into store card debt because of the way they are promoted. Shop cashiers with little or no financial experience push frazzled shoppers into signing up, with no explanation of the implications. Teenagers and young adults are especially susceptible to this.

So if you’re going to use credit, it’s best to use a regular card which won’t accrue ridiculous amounts of interest.

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So what does it involve? Think of it like a pay as you talk mobile phone. You load the card up with credit, and away you go. Here are some of the advantages to having a pre-paid credit card.

* No debt – it’s impossible to get into debt (one of the biggest risks of a regular credit card) because you only spend the money you’ve put on the card.

* No interest – this is a massive incentive, as the credit on a regular can soon mount up.

* Versatile - pre-paid cards can be used online, in shops, over the phone… In other words, exactly like a regular credit card.

* Safer - a pre-paid card is safer than carrying cash.

* Ease of approval – unless you’ve been involved in fraud, you will almost definitely be approved. This goes for under-18s too. Applying for a pre-paid credit card won’t affect your credit rating either.

So if you’re thinking about getting a credit card but don’t want to run the risks that a regular card presents, think about going pre-paid. Find the best deals at CreditCardExpert.co.uk.

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Types of 0% Introductory Offer

Before you decide which card to go for, you have to choose which 0% deal you want. There are two kinds. The first is the 0% balance transfer, which means you can move an existing debt onto the new card without having to pay interest on it for the duration of the introductory period.

Then there’s the 0% on purchases deal. With this card you won’t be charged interest on your purchases during the introductory period.

Mixing The Two

One possible problem with cards that offer 0% deals on both balance transfers and purchases is that the purchase period is normally shorter than the balance transfer period. This means that you’ll be charged interest on your purchases sooner. The problem with this is that none of your repayments will count towards clearing the purchase debt until you’ve paid your balance transfer debt. For this reason it’s best to use separate cards for transfers and spending, or get one with equal introductory 0% periods for both.

How Long is the Introductory Period?

Make sure you know how long the offer is for. It goes without saying that the longer the time period the better. Balance transfer periods used to be around six months, but you can get much better deals these days.

When the introductory period is over, you’ll be charged interest at the card’s standard rate. The best case scenario would be to clear the debt before the introductory period is over, but it’s best to go for the card which has the lowest standard interest rate just in case the best laid plans don’t come about!

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According to banking analyst Lafferty, profits for all collective UK credit card companies amounted to just £1.16 billion in 2006.

The fall in profits highlights just how much the industry relied on overcharging customers for fees such as going overdrawn or sending letters to customers, which were capped at £12 in spring 2006.

In the past year there has been much criticism of credit card companies over their attempts to introduce new ways of charging customers, which have been dubbed as cynical and unfair exercises by consumer groups.

The figures now put the UK credit market in the bottom third of global credit markets in terms of profit, with credit companies now only making an average of £16 per customer, compared with £27 per customer in 2005.

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On average, lenders made an average of £24 per credit card issued last year, a decrease from the £27 annual profit per card recorded in 2005, making the UK the third-least profitable market for credit card companies.

In addition, the study carried out by the payments research firm Lafferty Group, overall profits in the UK credit card market fell by 43 per cent to £1.2 billion in 2006.

While profits are predicted to fall further over 2007, with total profits for the year of £1 billion expected, the market is likely to recover in 2008.

Part of the reason behind the falling profits is the recent ruling against excessive penalty fairs for late payments, which has benefited the borrower.

However, Lafferty also reported a rise in bad debts on credit card, with borrowers struggling to pay off the bills, highlighting the need for consumers to carefully consider the product they take out.

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According to the most recent research carried out by Mintel, consumer spending rose to a record £1.09 trillion in 2006.

While home purchases continued to represent the biggest financial outlay by Britons, accounting for £4 in every £10 spent over the year, increasing amounts were also spent on luxury goods and lifestyle choices, such as holidays.

Of those questioned as part of the study, 23 per cent claimed that they were planning to take a major foreign break over the next year, while the amount spent on eating out grew by 18 per cent in comparison to 2002 levels.

“Rising disposable income has led to higher expectations about the quality of life, and as a result we are increasingly trading up and spending more on better quality, premium products and services,” said Neil Mason, senior retail analyst at Mintel.

Recent figures from the life assistance company CPP revealed that the average UK consumer will spend £157,530 on credit card over their lifetimes, with plastic being increasingly used to fund smaller, everyday purchases. 

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