Credit cards have many benefits but it’s important to use them in the right way and ensure the one you have is right for your needs.
That’s why we've come up with 10 top tips to help you maximise the benefits of having a credit card and avoid any costly mistakes.
1. Pay more than the minimum
Paying more than the minimum amount off your credit card balance each month will not only mean you clear your balance quicker, it will also significantly reduce the interest you pay over that time.
For example, if you spent £1,000 on a credit card that charged an annual rate of interest of 18.1% and only repaid the minimum each month (2.5% of the outstanding balance or £5, whichever is greater), it would take you 16 years and 11 months to clear the balance and in that time you’d pay £1,113.44 in interest – more than doubling the cost of the original purchase.
It’s therefore best to always try and pay off as much as you can afford.
2. Try and pay your balance off in full each month
If you can, the best way to use a credit card is to clear your balance in full every month. That way, you can ignore the interest rate charged and take advantage of the cashback and reward cards on the market to reduce your costs.
There are some fantastic deals out there for anyone who avoids charges by always paying off their balance within the interest-free period (see below).
3. Move to a 0% BT card if you have an outstanding balance
If you already have an existing balance on a credit card or you’ve used your overdraft and you’re paying interest, a card offering a 0% deal on balance transfers or money transfers could be a good way to tackle the situation.
The Virgin Money Balance Transfer card offers customers the opportunity to pay 0% on balance transfers for 29 months (so long as they are carried out in the first 60 days), after which they pay 21.9% pa (variable).
The offer is subject to a balance transfer fee of 3%. Again, this applies to transfers in the first 60 days - after this you’ll pay 5%.
The card also allows you to carry out money transfers, where you move funds from your card to your current account which you can then use to pay off an overdraft, for example.
In this case, you’ll pay no interest for 20 months on transfers made within the first 60 days - after this you’ll pay 23.9% pa (variable). There is a 4% fee (rising to 5% on transfers made after the first 60 days).
The card has a representative rate of % 21.9% APR (variable)*.
4. Be careful with your applications
If you make a credit card application and it’s rejected, this can have a negative impact on your credit score. Making too many applications in a short space of time can also have an effect.
So if in doubt, use the MoneySuperMarket Eligibility Checker to scour the market for the best deals for your circumstances and requirements.
All you need to do is enter a few details, before seeing a list of credit cards along with how likely you are to be accepted for each.
Our Credit Monitor app will also allow you to check your credit score as often as you like without damaging your score, and you’ll receive free hints and tips on how to improve it.
5. Use a credit card to improve your credit rating
Although having too much credit can negatively affect your credit score, having no credit history at all can also affect it. Fortunately, there are credit builder cards aimed at people looking to improve their credit ratings.
These include the Capital One Classic which charges 34.94% (variable) and has a representative rate of 34.9% APR (variable)**.
Pay off your balance in full every month and you should soon qualify for better deals.
6. Make your payments on time
It’s important to always make your credit card payments on time.
If you miss a payment you’ll be charged a fee of at least £12 and this can also leave a mark on your credit score, making it more difficult to borrow in the future.
Missing a payment can also mean you lose a promotional offer such as 0% on balance transfers or purchases. So always do your best to meet your payments on time and let your credit card provider know if you think you won’t be able to.
7. Set up a direct debit
While you may have the best possible intentions to pay your credit card bill by the due date, we all make mistakes and it can be easy to slip up.
To avoid missing a payment and all the related disadvantages described above, it is therefore sensible to set up a direct debit to pay off at least the minimum amount each month.
8. Use a credit card to spread the cost of a large purchase
One of the best introductory deals on purchases available at the moment is from MBNA.
Its credit card offers 26 months at 0% on purchases. However, you will need to clear your balance before the 26 months are up, otherwise you’ll pay interest at a rate of 20.93% pa (variable). The card has a representative rate of 20.9% APR (variable)***.
9. Get a cashback or reward card
If you pay off your bill in full every month, a cashback credit card can be a great way to get more for your money as a percentage of the amount you spend will be returned to you once a year, either as a cash payment or a reduction in your bill.
The American Express Platinum Cashback Everyday card for example, offers 5% cashback on all spending in the first three months, up to £100.
The amount of cashback you earn after the first three months will depend on how much you spend each year. You will earn:
- 0.5% cashback for spending up to £5,000
- 1% cashback for spending over £5,001
To qualify, you’ll need to spend at least £3,000 in a year. The card has a representative rate of 22.9% APR (variable)****. T&Cs apply.
Another option is a reward credit card that gives you points or vouchers for every pound you spend.
The M&S Reward Plus Offer credit card, for example, allows you to earn M&S points every time you shop. For the first 12 months, you’ll earn two points for every £1 you spend in M&S and one point for every £5 you spend elsewhere. After 12 months, you’ll earn one point for every £1 you spend in M&S and one point for every £5 spent elsewhere.
You’ll also receive a bonus voucher for 2,000 M&S points, worth £20, when you make your first purchase. And you will receive a bonus points voucher for 500 M&S points worth £5, when you spend on food, clothing or home at M&S with your card. T&Cs apply.
The card offers 6 months at 0% on purchases, followed by 19.9% pa (variable). The card has a representative rate of 19.9% APR (variable)*****.
10. Avoid overseas fees
Most debit cards charge you a foreign loading fee of between 2.5% and 3.0% if you use them to make purchases while abroad, and while the majority of credit cards do too, there are some exceptions.
The 118 118 card offers 0% on purchases, balance transfers and money transfers. You won’t pay any interest or charged fees with this card, but you will need to pay a monthly fee depending on your credit limit. This is £8 per month for a £225 credit limit, £3 per month for £250, and £14 per month for £1,200.
The card has a representative rate of 28.9% APR (variable).******
The Halifax card offers no 0% deal, so you’ll also pay 19.95% pa (variable) if you don’t clear your balance each month.
If you make a cash withdrawal, you’ll be charged this rate of interest from the moment you withdraw your money.
The card has a representative rate of 19.9% APR (variable)*******.
*Representative example: If you spend £1,200 at a purchase interest rate of 21.9% pa (variable) your representative rate will be 21.9% APR (variable).
**Representative Example: If you spend £1,200 at a purchase interest rate of 34.94% p.a. (variable) your representative rate will be 34.9% APR (variable).
***Representative Example: If you spend £1,200 at a purchase interest rate of 20.93% pa (variable) your representative rate will be 20.9% APR (variable).
**** Representative example: If you spend £1,200 at a purchase interest rate of 22.9% p.a. (variable) your representative rate will be 22.9% APR (variable).
*****Representative example: If you spend £1,200 at a purchase interest rate of 19.9% p.a. (variable) your representative rate will be 19.9% APR (variable).
******Representative Example: If you spend £1,200 at an annual rate of 0% (fixed) p.a. with a £14 monthly fee your representative APR is 28.9% APR (variable)
*******Representative Example: If you spend £1,200 at a purchase interest rate of 19.95% p.a. (variable) your representative rate will be 19.9% APR (variable).
All credit cards are subject to status and terms and conditions. Over 18s, UK residents only. Terms and conditions apply. See MoneySuperMarket.com for further information.
MoneySuperMarket is a credit broker - this means we'll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a commission by the lenders - though the size of that payment doesn't affect how we show products to customers.
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.