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Credit card jargon explained

If you have a debt on a credit card you can often save money by shopping around for a card with a lower interest rate and transferring your balance to the new card.  Many card providers offer interest-free periods on balance transfers, which could give you a chance to clear your debt without accruing more interest.

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Balance transfers used to be without charge, however, after the emergence of 'rate tarts'; people who kept switching cards to avoid ever paying any interest - balance transfer fees have been introduced.

These fees are generally around 2.5% - 3.5% of the total debt being transferred, making it not worth the switch for many smaller debts that won't take more than a few months to repay.

Insurance

Many credit cards have some form of insurance built into them, covering damage to the goods purchased with the card or the cancellation of a flight or holiday. This cover is free and can be useful if you have a problem with an item bought on your card, but there are usually conditions attached so read the small print if you intend to rely on the cover.

Annual percentage rate (APR)

The APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit that they are granted. So if you are borrowing £100 at an APR of 10%, you will pay £10 in interest and charges over the first year.

A credit card issuer will often quote a 'typical APR'; however, the actual interest rate to be charged may be set to the borrower's credit rating and personal circumstances. To class a rate as their 'typical APR', a lender has to have offered this rate or a better one to 66% of potential customers.

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