Are you spending too much on credit cards or not getting enough back? Check out our top 10 tips to ensure you're making the most of your plastic.
For many of us, credit cards are an everyday way of managing our money, whether it's to spread the cost of a purchase, be rewarded for spending or shopping safely.
However, the benefits of paying by credit card can be quickly wiped out if you're not careful. There are a whole host of potential fees and charges that can be incurred.
So how can you get the most out of your card and avoid a credit catastrophe?
Here are our top 10 tips:
This week's top-rated credit cards
1. Repay in full each month
If you can afford it, this is the simplest way to ensure you never pay a penny for the convenience of using a credit card. Interest is only charged on any spending you have done if you don't clear your balance in full by the date given on your monthly statement.
Your card provider won't insist on you paying off the entire amount. In fact, the minimum you have to repay could be as little as 2.5% or £5, whichever is greater. This could seem an attractive option but not only could it cost you hundreds, if not thousands of pounds in interest, it could also take you years to clear your debt.
2. Use a direct debit
If you set up a direct debit for your monthly payments you eradicate the risk of being late with your monthly payment. If you're even a day late, you'll be hit with a penalty charge of up to £12.
The other big risk of missed or late payments is that they could be recorded on your credit file. This will have a negative impact on your score and could affect your ability to get credit cards or other forms of borrowing in the future.
3. Never withdraw cash
It should be a golden rule to never use your credit card to withdraw money from a cash machine.
Cash withdrawals usually attract interest at a higher rate than purchases or balance transfers. There is no interest-free period so you start accruing interest from the day the withdrawal is made, regardless of whether or not you clear your balance in full at the end of the month. You'll also probably incur a cash withdrawal free.
That makes credit cards a very expensive way of accessing cash.
4. Repay costliest credit first
If you have more than one credit card then you should repay the most expensive one first.
Not only could this save you money in the long term, if you're making an effort to get on top of your debt, closing down an expensive card can be a real boost to your motivation.
5. Don't pay more than you need
If you have an outstanding balance that's costing you an arm and a leg, you may be able to slash the amount of interest you pay by moving your debt on to a cheaper credit card.
There are a number of interest-free credit cards available - Virgin for example offers a 16-month interest-free period on balance transfers, although you will be charged a 2.98% balance transfer fee. Balance transfer fees are normal on 0% deals, but they're worth paying and it opting for such a product could still save you money in the longer term.
Another option is a low-rate card such as Barclaycard Simplicity, which charges 6.8% for however long it takes to pay off the loan - well below the average rate of 18.21%.
Unfortunately, you'll only qualify for one of these cards if you have a top credit score, but if you can, you can save hundreds of pounds and pay off the outstanding debt more quickly.
You'll usually pay a balance transfer fee, often of around 3%, but this will still save you money in the longer term.
6. Reward yourself
If you're regularly using a credit card and pay your balance off in full each month, you could actually be making money as you use your card.
Switch to a cashback credit card and you could get paid to shop. For example, the American Express Platinum Cashback card pays you 5% in the first three months, up to £2,500.
It charges 19.9%, though, so you'll only make money if you do repay your full balance each month.
Other cards will make a set donation to a set charity or even football club, so your sensible credit card use can earn money for yourself or your chosen cause.
7. Don't spend if you've transferred a balance
If you've just found a 0% deal for balance transfers, spending on that card could undo all the great benefits.
For example, if your card is offering 0% interest on transferred balances for 12 months, but your purchases are only interest free for three months, you could be caught out.
This is because most card providers use a repayment system whereby your monthly payments go towards clearing the cheapest debt first, leaving you accruing interest at the highest rate.
8. Never exceed your credit limit
Keep a close eye on what you owe on a card and make sure you don't accidentally go over your spending limit.
Not only will doing so usually block the payment, you'll also have to pay a penalty fee of up to £12.
If you want to extend your credit limit, talk to your provider in advance and ask them to authorise it.
9. Shop around
Whatever you use a credit card for, there are some great deals out there but you'll only find them if you shop around.
Providers will often offer their best perks to new customers, to try and entice them in. So, whether it's rewards, balance transfers or interest-free spending you're after, shop around and switch to whichever has the best deal.
10. Brush up your credit rating
If you're planning to apply for a market-leading credit card - perhaps to transfer a balance to or to benefit from rewards - your credit score needs to be great.
Obtain a copy of your credit report from a company like Equifax or Experian, it only costs a few pounds. Once you know what your credit score is, you'll have a better idea of which cards you're likely to qualify for.
There are steps you can take to improve your rating. Close down any cards you don't currently use, flag up any inaccuracies on the report and make sure any outstanding payments you owe are made on time. This will gradually build up your credit score, allowing you to eventually qualify for the card you want.
Remember, if you have no credit history at all, you'll need to use credit to boost your score. Try a credit builder like the Barclaycard Initial.
For many of us, credit cards are an everyday way of managing our money, whether it's to spread the cost of a purchase, be rewarded for spending or shopping safely.
However, the benefits of paying by credit card can be quickly wiped out if you're not careful. There are a whole host of potential fees and charges that can be incurred.
So how can you get the most out of your card and avoid a credit catastrophe?
Here are our top 10 tips:
This week's top-rated credit cards
1. Repay in full each month
If you can afford it, this is the simplest way to ensure you never pay a penny for the convenience of using a credit card. Interest is only charged on any spending you have done if you don't clear your balance in full by the date given on your monthly statement.
Your card provider won't insist on you paying off the entire amount. In fact, the minimum you have to repay could be as little as 2.5% or £5, whichever is greater. This could seem an attractive option but not only could it cost you hundreds, if not thousands of pounds in interest, it could also take you years to clear your debt.
2. Use a direct debit
If you set up a direct debit for your monthly payments you eradicate the risk of being late with your monthly payment. If you're even a day late, you'll be hit with a penalty charge of up to £12.
The other big risk of missed or late payments is that they could be recorded on your credit file. This will have a negative impact on your score and could affect your ability to get credit cards or other forms of borrowing in the future.
3. Never withdraw cash
It should be a golden rule to never use your credit card to withdraw money from a cash machine.
Cash withdrawals usually attract interest at a higher rate than purchases or balance transfers. There is no interest-free period so you start accruing interest from the day the withdrawal is made, regardless of whether or not you clear your balance in full at the end of the month. You'll also probably incur a cash withdrawal free.
That makes credit cards a very expensive way of accessing cash.
4. Repay costliest credit first
If you have more than one credit card then you should repay the most expensive one first.
Not only could this save you money in the long term, if you're making an effort to get on top of your debt, closing down an expensive card can be a real boost to your motivation.
5. Don't pay more than you need
If you have an outstanding balance that's costing you an arm and a leg, you may be able to slash the amount of interest you pay by moving your debt on to a cheaper credit card.
There are a number of interest-free credit cards available - Virgin for example offers a 16-month interest-free period on balance transfers, although you will be charged a 2.98% balance transfer fee. Balance transfer fees are normal on 0% deals, but they're worth paying and it opting for such a product could still save you money in the longer term.
Another option is a low-rate card such as Barclaycard Simplicity, which charges 6.8% for however long it takes to pay off the loan - well below the average rate of 18.21%.
Unfortunately, you'll only qualify for one of these cards if you have a top credit score, but if you can, you can save hundreds of pounds and pay off the outstanding debt more quickly.
You'll usually pay a balance transfer fee, often of around 3%, but this will still save you money in the longer term.
6. Reward yourself
If you're regularly using a credit card and pay your balance off in full each month, you could actually be making money as you use your card.
Switch to a cashback credit card and you could get paid to shop. For example, the American Express Platinum Cashback card pays you 5% in the first three months, up to £2,500.
It charges 19.9%, though, so you'll only make money if you do repay your full balance each month.
Other cards will make a set donation to a set charity or even football club, so your sensible credit card use can earn money for yourself or your chosen cause.
7. Don't spend if you've transferred a balance
If you've just found a 0% deal for balance transfers, spending on that card could undo all the great benefits.
For example, if your card is offering 0% interest on transferred balances for 12 months, but your purchases are only interest free for three months, you could be caught out.
This is because most card providers use a repayment system whereby your monthly payments go towards clearing the cheapest debt first, leaving you accruing interest at the highest rate.
8. Never exceed your credit limit
Keep a close eye on what you owe on a card and make sure you don't accidentally go over your spending limit.
Not only will doing so usually block the payment, you'll also have to pay a penalty fee of up to £12.
If you want to extend your credit limit, talk to your provider in advance and ask them to authorise it.
9. Shop around
Whatever you use a credit card for, there are some great deals out there but you'll only find them if you shop around.
Providers will often offer their best perks to new customers, to try and entice them in. So, whether it's rewards, balance transfers or interest-free spending you're after, shop around and switch to whichever has the best deal.
10. Brush up your credit rating
If you're planning to apply for a market-leading credit card - perhaps to transfer a balance to or to benefit from rewards - your credit score needs to be great.
Obtain a copy of your credit report from a company like Equifax or Experian, it only costs a few pounds. Once you know what your credit score is, you'll have a better idea of which cards you're likely to qualify for.
There are steps you can take to improve your rating. Close down any cards you don't currently use, flag up any inaccuracies on the report and make sure any outstanding payments you owe are made on time. This will gradually build up your credit score, allowing you to eventually qualify for the card you want.
Remember, if you have no credit history at all, you'll need to use credit to boost your score. Try a credit builder like the Barclaycard Initial.
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