What's up you guys, sasha here most of us have credit cards, most of us use credit cards, use them for rewards and cashback and various perks. Some of us use them for zero percent, promotional balance, transfers, money, transfers purchases. Most of us know roughly how credit cards work and understand exactly. You know that you can go and spend money on it, and then you pay back at some point in the future.

But in this video i wanted to talk about nine, really interesting things that, maybe you don't know you probably know some of these things. In fact, i'd be surprised if you don't know the very first one, i'm going to start with one of the most obvious ones, but there are some things in this that i think most people probably will not know and probably would find really interesting about the world Of credit cards now i personally myself worked in credit cards for the majority of my career. I worked with banks, financial services, companies in uk europe and in countries all over the world on designing new credit cards and improving existing credit cards, and over the last six years, i've been an advisor and consultant to some of the biggest credit card companies in the World so i've been in the industry for a fair bit, and i just wanted to share some of these anecdotally interesting things that i think people would find interesting that they just probably have no idea about anyway. Let's dive right into the quirks and features and to start with, let's go with the most obvious, the one that most people probably do know something about, and that is section 75 protection.

This is probably one of the biggest reasons why people should use a credit card in the first place now in the u.s. This regulation is slightly different and i'm going to cover that in just a second in the uk. Every credit card that you have is covered by a specific piece of legislation called the consumer. Credit act.

1974. now 2006. They passed a bunch of amendments to the consumer credit act, but this particular rule was not touched in any way. So you have to go all the way back to the 1974 version to see what it says and in essence, it's really really simple.

Section 75, just states that the lender has equal responsibility and liability for the provisional services and goods as the consumer. Who is using the credit card so in practice? What this really means is, if you go and buy anything on the credit card and, let's say, you've bought something in the firm, has then gone and default, and you lost your money or the product that arrives is fundamentally like broken or there's some kind of problem. With the service, like you were not able to go on the holiday that you've paid money for the credit card company is liable for that. If the company that you have purchased the good resources from is unable to or unwilling to go and refund the money to you uh because of the failings of their provision of the service or the goods, so what this means is in that particular situation, you'll be Able to actually get the money back from your credit card provider and then the credit card provider will then have to go and figure out if they're able to recoup the money from the provider of their services.

After that point in time now really quickly in the us, the same law doesn't apply in the u.s. They don't have the consumer credit act in the us. They have a different set of legislation which does not provide the same predictions and guarantees. So that means you don't get the same protection by default, but the majority of the big credit card providers in the us still offer something relatively similar called purchase protection as part of the accounts that they provide.

And if you are with one of these big banks or credit card companies that do offer, this you'll have a relatively similar service. Although it is not quite as generous and there's a lot of restrictions on the amount that you can get and advertise you can claim. But in practice it probably will do exactly the same thing. The second thing that is worth knowing that i think a lot of people, just don't actually think about when they go and apply for a credit card, is once you have a credit card, even if you're repaying that credit card in full every single month via direct Debit, you will still have perceived debt on your credit profile because you have a credit card now, if you have a credit card, a bunch of data gets submitted by the credit card provider to the credit reference agency every single month and part of that.

There's a load of variables such as your statement, balance your monthly balance and the average balance they've had over the month, and even if you repay your credit card in full every single month, all of those numbers will still be populated. Now it is true that lenders are becoming better at assessing customers in terms of their likelihood to repay and their credit risk levels. But the truth is the way that credit risk models are built by people who lend money for mortgages for loans for credit cards for mobile phone contracts and any other form of borrowing is actually really rudimentary. Almost everyone still uses exactly the same techniques and methodologies that were used for the last few decades, which is a set of policy rules, upfront which is basically just yes, no rules and then a scorecard, which is usually a very basic logistic regression model.

It's not very complicated, it basically just means they assign points based on certain criteria to you, which can take your score up or down, and there's not that many criteria, typically in those scorecards. But what it really means is if they use variables, like the average balance on your account over the last month or if they use a variable, which is say your statement, balance or anything else like that, your average utilization of the account. So the proportion of your balance to your credit limit, then even if you're, the kind of person who repays the credit card in full every single month and doesn't actually really borrow in the sense of having a revolving balance that incurs interest. Those variables will still indicate to the models that the other lenders use, that you have some kind of debt.

So in the situation where you say applying for a mortgage or in the situation, we're trying to take on a car loan or anything else like that, the models that are used for deciding whether you're going to be eligible or not, will still think that you have Some amount of debt. Now it's not really that critical. It is actually not that material and in all likelihood, if you're repaying your credit in full every single month, you probably won't have a huge amount of effect and actually having a credit card is better. For your credit profile than not having any form of credit at all, but all the same it is just worth noting that the amount you spend on your credit card will still go into those models as a form of debt.

The third thing i wanted to point out is something that a lot of people are concerned about, and that is they think that you they can go and build up a balance on a credit card, and then the credit card company will go and increase the rates That they have to pay for that balance, which will make it much more difficult for them to actually meet the repayments in the future and cost them a lot more than they expected now in the united states. This practice is actually illegal, so this won't happen. If you have a us credit card in the uk, it is still possible for credit card companies to do this, because the fca and the government haven't been bothered to actually put any legislation in place which would ban the repricing of existing customers credit cards anyway. I digress in the uk if you do have a credit card if somebody wants to go and increase the apr on your credit card, so the interest rates that you pay for the various different types of balances that you have they legally have to notify you in Advance and you always have the right to opt out.

This is the really critical thing. The only time that you don't have the rate opt out is if your credit agreement is linked to the bank of england or some other interest rate and as a result, when those interest rates increase. Your interest rate will also increase at the same time. But those are normally going to be relatively low and relatively infrequent increases.

The other two types of increases are when a bank decides that they need to increase rates because their product is commercially unviable or there's some kind of economic circumstances like a massive increase in risk and as a result, they have to increase the rates of large chunks. Of their portfolio or the second, which is called risk-based repricing, which is they determine that you are a higher risk than perhaps you were in the past, based on the models that they employ or you are within a higher risk spectrum of people within the overall portfolio And, as a result, they decided that they need to increase your interest rate in order to offset that higher risk. The good news is that you can opt out of that increase. A lot of people are not aware of it, even when it actually happens to them.

Even though it says in the letter that they have the right to opt out, amazingly only something like eight to ten percent, depending on the credit card provider of the people who get an increase in interest rates applied to them actually go and reject it. The truth is in a lot of cases for a lot of these types of customers. They are not actually high risk in a lot of these cases, they're not suddenly a really bad risk to the bank in a lot of cases. This is just a way for the bank to justify giving the increases by segmenting people and deciding that some people are higher risk than others based on a model that somebody built in a lot of cases.

The same people will be able to go and qualify for a much lower rate products if they just went and looked on a comparison website of their choice. So in most of these cases, there's no reason not to decline. This increase. The only constraint with declining increase is that you will have to go and close your account down, so you won't be able to use the card any longer after you've gone and declined it.

But what you will be able to do is to repay the debt that you have on your credit card at the old interest rate for as long as it takes you to go and pay it down which, if you do qualify for other credit products. If you really do need to have a credit card, even though you are in that position, where you're paying debt, you can go and get a different one instead in order to get in the benefits of protection and all these other perks anyway, let's move on to Number four number: four: i have a really interesting quirk that some people accidentally fall foul off and that is not all payments to your credit card count. Now let me explain exactly what i mean by that. First of all, in order to make sure that you never ever fall into any kind of trouble with your credit card provider, it is a really great idea to set up a direct debit in most cases, if you're not actually planning to borrow money on the credit Card it is really really good to go and set up the direct debit for the full amount.

If you are planning to borrow - or let's say you are wanting to go - make manual repayments, because you want to make sure that you have enough money in your bank. Account or something else, you still might be better off, setting up the direct debit for the minimum amount, so that if the worst thing happened and you missed the date or something or life got ahead of you or whatever happened, that minimum payment will still go out. You will still not get in trouble. You will still not get late payment fees.

You will still not get the flags on your credit profile, which will negatively impact your ability to borrow money in the future. So you might want to go and do that in even if you want to go and make manual payments or pay using your gyro slip or whatever else that it is that you like to do. But here is the really interesting thing: the way that the payment cycle works is that when your statement is generated, you then have a period of usually somewhere between 19 and 25 days in most cases 25 days in order to make the payment and what happens? Is you have to go and make the payment within that period of time, in order for that payment to qualify against the previous statement for which you are paying the money now exactly a month after that statement is generated so, roughly speaking, five or six days after The payment due date on a previous statement, the next statement will be generated and any payments that you then make after that point will essentially apply to that statement. Now.

Here is an interesting thing if you go and make a payment between the payment due date and when the next statement is generated in that five day window, that payment will actually not go towards any particular statement at all. It will essentially not count towards any minimum payment whatsoever. It will not go forward to the next statement. It will not go back to the old one unless you missed it, in which case it will bring you up to speed and in most cases, will probably result in you not getting that late payment flag on the bureau, i'm not going to go into the details On that, but if you make a payment in that window it will just affect your balance, so it will go and repay your balance, so your balance will go down and you'll still help you repay the debt, which is a good thing, but it won't count towards Any statement so just something really important note if you're wanting to make sure that that payment does go against the statement, make sure you pay within the window between the statement date and the payment due date and not that five day gap between when the payment due Date happens and before the next statement is generated.

My next point is closely related, and that is the timing of the payment is actually important if you weren't paying your balance in full up to the point when you're making a payment, some people think that it isn't material as long as you pay in that window. Between when the statement is generated and when the payment due date happens, it's all the same, because that's how all the other bills that people are used to paying work with credit cards. It's not the same with credit cards. Interest is calculated in essence on a daily basis, i'm not going into the specifics of exactly how it works, but in essence, every single day that you carry a balance in your credit card will add interest on the next statement.

So the sooner you're able to make a repayment the better it is for reducing that amount that you owe so, if you're wanting to go and repay your balance as quickly as possible. When you come across some money, you don't need to wait until the next statement is generated. You don't need to wait until the payment due date. You don't need to wait until your direct debit comes out, because if you do, you will be paying more interest.

Even if you have a direct debit set up, that direct debit will only come out right at the end of the period over which you can pay and essentially you'll, be then incurring interest for that entire period of time. So you might as well go and make that payment as soon as possible, and if you are carrying debt and paying interest on it on your credit card, you should and can go and pay before the statement is generated. If you are then able to go and make the next payment after the statement is generated before the next payment due date to make sure that you stay up to date, because the earlier you make your payment, the less interest you will have to pay on your Debt - and that means you will be able to repay your debt quicker. The next thing i wanted to briefly mention is the fact that a lot of people don't quite understand that everything around a credit card usually works on a cycle basis, so the way that your transactions are processed, the way that your interest is calculated, the way your Fees are calculated, everything runs on these monthly statement cycles.

The one thing that does not run on monthly statement cycles is your credit limit and a lot of people accidentally get into trouble when they don't realize that the credit limit is always the same credit limit and isn't related to any one particular statement cycle. So if you have a credit limit of a thousand pounds and you then go and spend 900 pounds on one statement and you have their debit set up to repay that balance in full, if you then go and spend another 200 pounds after that, before that direct Debit has come out. You will still go over your credit limit, even though in each statement month you spend under the thousand pounds, and even though you have a thing in place to repay your balance in full, even though you are doing everything exactly how you feel you should be doing. You may still find that if your balance at any point in time goes over that credit limit, so if you spend the 900 and then you spend the 200 and you're now over the 1000 pounds in total, even though you're doing the repaying in full, you will Still break your limit, so if your credit card allows you to go over limit, you will then incur an over limit fee of 12 pounds.

You will then have that data reported to the credit reference agency, saying that in that month you went over your limit and none of those things are particularly great things for your credit profile. So just beware be really careful. Make sure that you always remember that it's the total balance, it doesn't care about statement, dates or payment due dates, or anything like that. The balance that is on your credit card at any point in time should not exceed your credit limit.

Here is a really minor point, but quite important for some people who sometimes accidentally do something that forces them to pay a lot of fees, a lot of interest without them ever actually realizing it. Not all transactions that you think are regular. Retail transactions are actually gon na, go against your purchases, balance now really really quickly. Credit cards have different types of balance that incur different types of interest rates and different fees.

You have purchases which is regular, spend online or in shops on things like that, then you have balance transfers. Then you have money transfers, balance transfers are repaying another credit card with a credit card and money transfers is sending money from your credit card to your current account. Not all credit cards allow you to do that. I'm not gon na go into that detail, but then there's the fourth, which is cash.

So if you go and stick your credit card into the cash machine, you'll usually have to pay a much higher rate of interest and that rate of interest applies, whether you pay your credit card in full or not. It doesn't care every single day that that balance sits there you'll have to pay that much much higher rate of interest and you'll also have to pay a fee associated with withdrawing cash. So we're drawing cash from credit card is a really bad idea, because it is incredibly expensive. Now there are lots of transactions that you might accidentally do, which actually count as cash and not purchases, even though most people, maybe some people, will think otherwise, and it's really important not to use your credit card for those transactions.

Let me just list a few really common ones that i thought of when i was writing some notes on this. For example, if you're paying through paypal, some of those transactions may come through as cash. If you do any kind of gambling, if you use your credit card for it, whether online or in a shop that will come through as cash if you're buying lottery tickets or any other thing like that, that will also classify as cash now if you're buying a Lottery ticket as part of a larger purchase in a supermarket. It really depends, but in most cases it probably won't matter, but i i still wouldn't use a credit card if you're buying a lottery ticket as part of any purchase, because technically there are ways that supermarkets could process that transaction under a separate code.

And if that was to happen, you might go and incur those extra charges. Other things are things like online gaming again just buying some kind of tokens or some kind of upgrades to something in the game that you're playing online may qualify as a cash transaction, and even things like buying stocks and shares or foreign currency uh will also cost. You cash fees, so don't do any of those things with a credit card just be really careful, because you'll be hit with a bunch of interest and a load of fees and also having a cash balance in your credit card is not that great. For your credit profile, so just take extra care now.

The last two points are a little bit more quirky and i just added them, because i thought some people would be really interested in these points, even though they probably aren't that materially important to how you actually use a credit card. Point number eight: is this: whenever you go and speak to your credit card about some kind of issue or if there's some problem with your account, just be aware of the fact that the technology that underpins pretty much every single credit card in the uk and most Credit cards in the world is so ridiculously old and antiquated that these poor people that are trying to help you have to use these extremely old type of computer screens to go and process whatever requests you're asking them to do it isn't the sort of thing that You might expect where they have a modern screen and just click a few things, and it's all done so just have that extra little bit of patience where the person is trying to help you, because these things are incredibly old school in lots of cases. And i can't believe that even the market leaders today in terms of providing the software that credit card companies use, which is thesis and first data, provides such old-school way of working with the systems, i'm not even talking about 10 or 20 year old technology. I'm talking about those green screens, you know like a black screen where you have green text across it, and you have to use your keyboard to key in specific parameters and queries in order to access different screens yeah we're talking something that looks like it comes from The 80s or 70s that is still in use today by the vast majority of credit card providers, just just something important to know.

I said my favorite one till last, because this one always amuses me - and i just wanted to share something that some people might find useful, especially in this day and age, when contactless is becoming more and more common, and that is what is the best way to Actually use your credit card when you're paying at a contactless terminal, because i see people generally do one of two things when they're trying to go and do it. The first group of people go and use the credit card and get the chip to be. As close as possible to the terminal to the middle of the terminal, because they think that it's the chip, you know the bit that you can see on a credit card that is actually the thing that does the wireless communication. The other group of people go and try to use the corner of the card that has that sort of two line: symbol for contactless printed on it.

Thinking that the bit where the thing is printed must be the place where the optimal place to touch the card. On the terminal is, and as a result, sometimes people will go and like move the card around. Sometimes it doesn't read it, especially on some of the older terminals. Sometimes you have to go and do it two or three times and doesn't register it or it register it after you've actually moved the card away, and you have to do it again.

Um here is what the optimal way actually is. You need to go and take the middle of your credit card and move it to the middle of the terminal that that's it that's as simple as that. The reason that that works is because the way that the contactless technology works in the card is the chip is connected to a set of antennae that run around the perimeter of your credit card and the way, essentially that the credit card speaks or knows that there Is a terminal next to it that needs to be activated in a way is through a sort of similar way to the way that induction works. So unless the terminal activates the antenna inside your card, which then activates the chip - and that is how the transaction is processed, so if you only put one side or one corner of the card, you might not actually get enough signal to go and hit your entire Antenna inside the card go and put the middle of your card against the terminal, and that will work every single time happy to help.

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