Financial & Travel Musings

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Car insurance is something of a peculiar product. It’s something that we are legally required to buy and many people if they were given the choice probably wouldn’t bother to buy it at all.

However, we’ve just had a guest who really did need it and the money that he’ll get back from the insurance company will be pretty substantial.

What happened is that his car caught fire as he was driving along the motorway in France yesterday afternoon. That’s not really something that you expect to happen, is it? Anyway, the towing would have been several hundred euro, the transport to his hotel over EUR 100, the hotel another EUR 80 or so and it looks like the repairs will cost well over EUR 1000. Oh, and then there’s the not so insignificant matter that he’ll probably end up having to fly home and then back to collect the car as this is a holiday week and so it probably won’t be repaired for at least another week.

So you can get your money’s worth sometimes!

One thing to watch when you’re buying your car insurance online is that there are a lot of optional extras that can be included in your policy. Obviously most of the time you’ll not need them but if you hit a situation like that above then they are very, very handy to have. For instance, because this is the peak holiday season, he’d have had quite a lot of difficulty to get booked into a hotel himself but it was his insurance company who organised that for him

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For most people their first thought is to head along to their bank and sign up for a credit card terminal.

The snag is that if you’re a new business chances are that they’ll simply say “no” unless you are in an area where there’s simply no option not to accept cards (eg restaurants, hotels) but the majority of business don’t fall under those headings. However, in some ways that “no” is lucky as banks usually have higher credit card acceptance charges.

What you should really do is to checkout places like authorize.net which are much more geared up to online businesses and can generally provide you with the ability to accept cards quite early in the life of your business and at lower cost than a direct approach to your bank is likely to come up with.

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Some credit card comparison sites make a point of recommending the best credit card on the basis of the commission that they’ll get when you apply for it through their site. This review isn’t like that. There are no affiliate links on any of the recommendations below. That doesn’t mean that this review is therefore perfect, just that there’s no financial bias attached to it.

The first thing that you need to realise is that there is no single “perfect” card for all occasions. What is perfect for you at any given time is determined by a combination of:

1. your financial circumstances ie whether you are a good, average or poor credit risk;
2. your intended use for the card eg whether you will pay in full each month, use the credit facility and whether you intend it for domestic use or for holidays; and
3. the characteristics of the card in question ie its charges, interest free period, interest rate and foreign exchange charges.

If you’re a poor credit risk or have no credit history, the card to go for is Capital One’s classic card because there’s no annual fee and a 56 day interest free period for purchases when you pay the balance in full. The headline interest rate is 35% but if they think your credit history is better than you do then they’ll normally offer you a different card at a much lower rate. They’re also a very reasonable bunch of people to speak to on the phone which is more than can be said for a lot of credit card companies.

If you’re going to pay in full each month then the only sensible thing to do is to get a card with no annual fee that will pay you through points or straight cash. Frankly, the bulk of the points schemes are next to worthless because few people actually spend the points, therefore cash back schemes are the best way to go on this. Here again, Capital One win with their cashback card which comes with a 45 day interest free period for purchases when you pay the balance in full. The headline interest rate is 16% and the card refunds 1% of the value of the purchases you make with it; there’s usually an offer period when they refund 4%.

If you’re going to use the credit facility then you want a card with a low interest rate. At present, the clear winner on this appears to be BarclayCard with their simplicity card. This comes with a 56 day interest free period for purchases when you pay the balance in full. The headline interest rate is 6.8% although that may be adjusted depending on your own circumstances; there’s no annual fee.

If you’re going to use it on holiday then you want a card with low or no foreign exchange charges. The normal recommendation for that is the Nationwide Building Society but at the moment the Post Office, Thomas Cook and Abbey also offer cards without the foreign exchange charges. The Nationwide tend to be quite stingy with credit limits.

If you’d like a high limit then it’s usually best to try one of the cards issued by MBNA although do bear in mind that MBNA are a ruthless bunch and raised interest rates from 15% to 35% for a considerable number of their customers.

I think those should cover all the circumstances that can arise and which have specific cards meeting them. In that none of the above cards charge an annual fee you could, of course, apply for all of them (space out the applications by a month or so if you’re doing that).

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