Credit cards can be very useful, and can even save money if used in the right way.
However, many of the millions of Britons with credit cards are missing out on the benefits, and paying more than they need to for their debts, because they are misusing their plastic.
Here, we highlight five of the most common credit card pitfalls – and look at ways to avoid them.
1. Interest payments
Most credit cards charge interest.
However, you can avoid paying interest on your debts by switching them to a 0% balance transfer credit card.
There are some fantastic interest-free offers available at the moment - some 0% balance transfer cards allow you to avoid paying interest on your debt for 24 months or more.
Whichever card you go for though, it is important to clear your balance within the interest free period - as when the 0% period ends, the standard interest rates on cards of this kind tend to be around 17%.
2. Cash withdrawals
If you use your credit card to withdraw cash, you generally get charged a much higher rate of interest than standard purchases.
While the average credit card interest rate is currently 17.31%, a typical cash withdrawal of £500, for example, is charged at 26.72%.
Plus the interest for cash withdrawals is usually calculated from the date of the transaction (rather than the next payment date). This means that cash advance costs can quickly mount up - even if you clear your balance in full with your next payment.
The best approach? Avoid using your credit card to withdraw cash out of ATMs or for other cash advances altogether.
3. Missed payments
Figures indicate that more than one in six – or some 8 million Brits – have missed at least one bill payment in the last year or so.
And credit card bills are some of the most commonly forgotten.
However, not only do missed payments lead to penalty fees, they also have a negative impact on your credit score and could even cause a promotional 0% offer to be withdrawn.
Setting up a direct debit to pay off at least the minimum amount required each month could therefore prove a sensible move.
4. Overseas transactions
Overseas money transfers or travel money purchases attract the same high rate of interest as cash withdrawals (see above).
Most credit cards – and debit cards – also charge you a foreign loading fee if you use them to make purchases while abroad.
Fortunately, there are some exceptions. Both the Saga Platinum card and the Nationwide Building Society card, for example, offer commission and fee-free overseas purchases.
5. Minimum payments
Most credit card holders pay off more than the minimum amount required each month.
However, if you do choose to pay just the minimum amount – often just £5 or £10 a month – it will take much longer to clear your debts and will cost you hundreds of pounds in extra interest.
If you are struggling to make your monthly repayments, it may be worth switching your debts to a 0% balance credit card - it could save you hundreds of pounds .
Disclaimer: Where we compare financial products offered by different financial services providers or make a recommendation in relation to a particular product or provider, we do so as the providers of an information service, and this is not intended to constitute a recommendation, invitation or inducement to any particular individual to make any specific investment.