10 credit card tips

Credit cards can be hugely useful when it comes to spreading the cost of large purchases; they can also help you to make big savings if you take advantage of the many cashback and rewards schemes on offer.

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However, millions of credit card users get stung because they either have the wrong card for their needs or do not use it in the right way.

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 just the minimum amount off your credit card balance each month will not only extend the time you are in debt, it will also significantly increase the interest you pay over that time.

For example, if you spent £1,000 on a credit card which 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 debt and in that time you’d pay £1,113.44 in interest – more than doubling the cost of the original purchase.

You should therefore always try and pay as much as you can afford.

2. Try and pay your balance off in full each month

In fact, if you can, the best way to use a credit card is to clear your debts 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 cut 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 debt

If you already have debts built up on a credit card or overdraft, then a card offering a 0% deal on balance transfers could well be the best way to tackle the situation.

The MBNA Platinum credit card offers new customers the opportunity to pay 0% on balance transfers for 36 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 1.99% (again, for transfers in the first 60 days - after this it rises to 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, subject to a 4% fee (rising to 5% on transfers made after the first 60 days). After the 20 months are up, you’ll pay 23.9% pa (variable).

The card has a representative rate of 19.9% APR (variable)*.

4. Don’t apply for a card you have no chance of being accepted for

The best deals are reserved for customers with good credit scores, and failed credit card applications will have a detrimental impact on your credit score.

So if in doubt, use the MoneySuperMarket Smart Search 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.

5. Use a credit card to improve your credit rating

Having too much credit can damage your credit score. However, having no credit history can be equally damaging. 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. Don’t miss a payment

Even if you cannot afford to clear your credit card balance in full every month, it is vital to make a payment of at least the minimum amount by the due date.

Otherwise, not only will you face penalty charges of at least £12, you will also compromise your credit score, making it more difficult to borrow in the future.

If you are taking advantage of a 0% offer on either balance transfer or purchases, missing a payment can also result in you losing the promotional rate.

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 Santander.

Its credit card offers 30 months at 0% on purchases. However, you will need to clear your balance before the 30 months are up, otherwise you’ll pay interest at a rate of 15.9% pa (variable). The card also has a £3 monthly fee and a representative rate of 21.7% APR (variable)***.

Alternatively, the Sainsbury’s Bank Purchase credit card also offers 28 months’ interest-free on purchases. After that you’ll pay 18.95% pa (variable).

The card also allows you to earn Nectar card points as you spend and you’ll earn 500 bonus points each time you spend £20 or more on Sainsbury’s shopping with your card, up to 10 times in your first two months. This offer ends on July 30. T&Cs apply.

The card has a representative rate of 18.9% 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 18.9% pa (variable). The card has a representative rate of 18.9% 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.

Cards that don’t charge foreign usage fees (including cash withdrawal fees) include the Halifax Online Clarity credit card and the Santander Zero credit card.

The Santander card offers 0% on purchases for one month but after that you’ll be charged 18.9% pa (variable). The Halifax card offers no 0% deal, so you’ll also pay 18.9% 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 cards both have a representative rate of 18.9% APR (variable)******.

*Representative example: If you spend £1,200 at a purchase interest rate of 19.9% pa (variable) your representative rate will be 19.9% 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 15.9% pa (variable) with a £3 monthly fee your representative rate will be 21.7% APR (variable).

****Representative example: If you spend £1,200 at a purchase interest rate of 18.95% pa (variable) your representative rate will be 18.9% 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 18.9% pa (variable) your representative rate will be 18.9% 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.

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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