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 Virgin Money 40 month balance transfer card offers new customers the opportunity to pay 0% on balance transfers for an incredible 40 months, after which they pay 20.9% pa (variable).

The offer is subject to a balance transfer fee of 2.53% (so long as your transfer your outstanding balances within the first 60 days).

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.

Again, you’ll pay no interest for 40 months, subject to a 4% fee, so long as you carry out your transfer within 60 days. After the 40 months are up, you’ll pay 20.9% pa (variable).

The card has a representative rate of 20.9% APR (variable)* and this offer ends on June 30.

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 tool to scour the market for the best deals for your circumstances and requirements.

All you need to do is click on ‘Find a credit card’ on our comparison tables and 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 the Post Office.

Its credit card offers 27 months at 0% on purchases. However, you will need to clear your balance before the 27 months are up, otherwise you’ll pay interest at a rate of 18.9% pa (variable). The card has a representative APR of 18.9% APR (variable)***.

The Sainsbury’s Bank Nectar Purchase credit card also offers 27 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 if you apply before September 27, you'll earn 5,000 bonus Nectar points when you spend £800 on Sainsbury's shopping or fuel in the first three months. 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 up to £2,000 in the first three months.

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 £3,500
- 1% cashback for spending between £3,501 and £7,500
- 1.25% cashback for spending over £7,501

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 credit card, for example, allows you to earn M&S points every time you shop – you’ll earn one point for every £1 you spend in M&S and one point for every £5 you spend elsewhere.

When you receive your card, you will also 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.

The card offers 19 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 MBNA Everyday Plus American Express credit card and the Halifax Clarity Card.

Be aware though, if you make a cash withdrawal, you will still be charged interest from the moment you withdraw your money.

However, the MBNA card charges one low rate of 7.4% pa (variable) on cash withdrawals, purchases, balance transfers and money transfers. The Halifax card charges 18.95% pa (variable).

The cards have representative rates of 7.4% APR (variable)****** and 18.9% APR (variable)**** respectively.

*Representative example: If you spend £1,200 at a purchase interest rate of 20.9% pa (variable) your representative rate will be 20.9% 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 18.9% pa (variable) your representative rate will be 18.9% 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 7.4% pa (variable) your representative rate will be 7.4% 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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