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The ten credit card commandments

published: 06 December 2021
Read time: 5 minutes

Thinking about taking out a credit card? Follow these rules and you won't go far wrong.

Used responsibly, credit cards can help us spread the cost of big purchases, keep track of spending, and be a helpful way to get finances back on track. Some even offer the chance to earn rewards.

That said, if not used carefully, mistakes made with your plastic could damage your credit rating or send you spiralling into a world of debt due to high interest rates and penalty charges.

The key is to follow the rules, and use your card in the right way. Here we take a closer look.


1. Scour the T&Cs before signing up

Before signing up to any new card, make sure you understand exactly what you’re getting into. This includes things such as interest rates, annual fees, penalty charges and perks.

This will help you avoid falling into any traps. If there’s any words or jargon you don’t understand, look them up or seek clarification.


2. Get to grips with the APR

Make sure you're happy with the actual cost of the card. The annual percentage rate (APR) is the cost of borrowing money over a year and takes into account interest, as well as other charges, such as an annual fee.

APRs are used to help you compare credit card offers. But it’s crucial to get your head around what the APR actually means.


3. Always make at least your minimum repayment

Ensure you do this every month. Better still, clear your balance in full. That way, you won’t pay a penny in interest. You will also find your balance goes down a lot quicker.


4. Never miss a payment

Be disciplined about making sure your monthly payment is made on time. If not, you could face a late fee of around £12. This will apply even if you’re as little as a day late.

You could also end up with a battered credit rating, as marks left by missed or late payments can remain on your record for six years, making it harder to get access to credit in the future.

It's a good idea to set up a direct debit so the payment goes out automatically.


5. Clear your card before the promotional period ends

While an interest-free balance transfer card can be a great way to make debts more manageable, it’s vital to note down when this 0% deal expires so you can focus on clearing your debt by then. If not, costs could rise once interest charges kick in.


6. If you have a rewards card, always clear your balance in full

Using a rewards or cashback card for day-to-day spending can be a great way to boost your earnings.

But with this type of card, you must always pay off the whole balance. If not, any interest you get charged could outweigh any rewards or cashback you’ve earned.


7. Don’t max out your card

Always aim to keep the balance on your card below 25% of the available credit limit. So, for example, if you have a £2,000 limit, you should try not to have debt more than £500. This will show a lender that you’re not too heavily reliant on credit.


8. Never use your credit card to withdraw cash

When you take money out of an ATM with your credit card, interest is added to your account from the moment you get your cash. This is the case even if you pay off the balance by the due date that month.

In addition, you may be charged a cash withdrawal fee of around 2% of the amount you take out.


9. Tread carefully before using your card overseas

With most card providers, you will face a foreign transaction fee of around 2.75% to 2.99% each time you use your plastic abroad. Plus, if you use your card to take cash from an ATM, you’ll pay the foreign transaction fee as well as a cash withdrawal fee.

Always check with your card company before travelling. That way, you can plan the best way to pay for things during your time away.


10. Check your credit report on a regular basis

Your credit score can have an impact on all sorts of areas of your finances, including applications for cards, loans, mortgages – and even mobile contracts – so you need to keep a close eye on it.

Be rigorous about checking all the information held on your report is correct and up-to-date. If you find any errors, get these corrected right away.

You can check your rating for free with our Credit Monitor tool. You'll also get personalised tips on simple steps you can take to boost your score.