8 things your credit card provider doesn't want you to do

Published:
31 January 2013
Topic:
News,Money,Credit Cards

There might be some great credit card offers on the market at the moment, such as 0% on balance transfers for 25 months, but the truth remains that credit card companies are all in the business of making money.

But you can be among those customers to never pay them a penny by making sure you take note of these eight things they don't want you to...

1. Transfer your balance to another card

If you've got a balance sitting on a credit card which is charging an uncompetitive annual percentage rate (the average is a whopping 17.32%), your credit card company is probably your number one fan. Because so long as you carry debt on your card, it will make money from you in interest.

What your credit card provider doesn't want you to do is transfer the balance to a different card with 0% or better rate, simply because that will rob them of their monthly interest payments.

Take back control by transferring your balance to something like the Barclaycard Platinum Credit Card with Extended Balance Transfer. This card offers 0% on balance transfers for a whopping 25 months (subject to a 3.2%), giving you ages to clear the balance without paying a penny.

But if your debt is already on a Barclaycard, you won't be able to transfer it to another one. In this case, the Halifax Balance Transfer Credit Card is a good alternative, offering 24 interest-free months with a 3% fee.

2. Pay off your balance in full each month

When you don't pay your balance off in full each month, you're charged interest on the balance and the credit card provider profits.

To make sure this doesn't happen you can set up a direct debit payment each month from your bank account to the card. This will clear the balance regardless of how much it is, so there's no chance you'll be charged interest.

3. Clear the balance you've transferred from a different card within its 0% offering

Transferring a balance to a 0% balance transfer card is a great way to get some breathing space to pay down a balance without incurring any interest charges, but you need to make sure you clear it before the 0% period ends.

If you let the transferred balance linger on beyond end of the interest-free period, you'll start paying interest again - much to the delight of the provider.

4. Pay off purchases within the interest-free purchase period

When you're on holiday you might wish it would never end, but if you paid for it on a 0% credit card and you fail to pay off the cost by the end of the introductory period, that holiday will stick with you for longer than you'd like thanks to the interest payments that you will incur.

Cards which offer 0% on purchases are great for spreading the cost of a big-ticket item like a holiday or a car, but at the end of the 0% period the rate will revert to the standard APR.

The average credit card standard APR is 17.32%, so letting the balance run beyond the end of the 0% period could prove costly for you and profitable for the credit card provider.

The Tesco Clubcard Credit Card for purchases offers 0% for 16 months, which is a fairly decent amount of time to pay down a balance. It also offers 9 months on balance transfers for a 2.9% fee.

5. Be too clever with rewards

Credit card providers offer rewards, cashback and incentives to get you to sign up. What they probably don't want you to however is to be too clever with those reward schemes and therefore cost them too much money.

For example, if you have a Santander 123 card you could leave your wages untouched in your current account each month and pay for everything throughout the month on the Santander card. This would earn you 1% cashback on supermarket spend, 2% in department stores and 3% on petrol (and National Rail and Transport for London).

Used wisely, this could cost the Santander a fair few quid, and then you just pay off the balance with your wages at the end of the month and reap the cashback rewards. Of course you need to a pretty disciplined spender to make this pay.

6. Pull out a better credit card when you are overseas

Your current credit card provider might hope that you'll use its plastic (if necessary) when you're abroad, earning it lots of lovely cash in fees.

What it won't want you to do is use a different more cost-effective card for overseas spending and rob them of those fees.

Overseas spending credit cards such as the Halifax Online Clarity Credit Card carry no fees for overseas spending - so consider having a card just for this purpose.

7. Use your legal rights

If you buy something worth between £100 and £30,000 using a credit card and the goods or services turn out to be faulty, damaged or simply don't materialise, you can claim the money back thanks to the Section 75 of the Consumer Credit Act.

Under the Consumer Credit Act, the credit card provider is jointly liable with the merchant for when these kinds of problems occur, which means they have to reimburse you from their own coffers.

What's more, the Consumer Credit Directive offers the same protection on purchases worth between £30,000 and £60,260, so you're pretty well covered with the two.

It doesn't even matter if your credit card limit isn't high enough to cover the entire cost of the purchase, as long as you've paid the deposit of at £100 the credit card, the total value of the purchase will be protected.

Clare Francis explains her first-hand experience of the Consumer Credit Act here.

8. Clear your debt in one fell swoop and close your account

It sounds a bit clingy, but credit card companies hope you never leave - but only because they can't make any money from you. So clearing all your debt in one fell swoop and closing your account is something they definitely it doesn't want you to do.

Aside from not having to pay any interest, closing your account can have other benefits. Closing old and unused cards means you'll have access to more 'available credit', which can boost your credit score. It also puts you back in the running for deals only offered to new customers in future.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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Mark Hooson

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Senior Writer

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