Credit card charges often catch us unprepared. Make sure you save money by avoiding a lot of expensive credit card booby traps in the small print, sales techniques, and routine operations of your card provider. These five rules will help you keep your credit card charges under control.
Credit cards can be very cheap if you use them correctly. However, I’ve counted 37 different tricks that card providers hope you’ll stumble over.
It would take a long dissertation to explain how all of three dozen tricks work. Luckily, just half could cost you serious money, and all of those can be prevented if you follow just five rules:
1. Pay in full, or at least 4%, every month, preferably by direct debit
If you have outstanding debt, you have to make a repayment every month, regardless of whether you have an interest-free deal or not. Miss a repayment, and you’ll have your cheap deals stripped away from you and your credit card charges piled high.
Ideally, pay off your card in full every month. If you can’t, don’t stick to the minimum repayment, because it will kill you. The more debt interest and fees you pay, the less money you’ll have for the rest of your life.
Pay off at least £40 per £1,000 of debt, but preferably more if you can afford it. Set up a direct debit to make repayments. To avoid a few more tricks, do so quite a few days before the payment due date.
2. What not to use your credit card for
Unless the card makes a big deal in its advertising about being different in these areas, you shouldn’t use it for withdrawing cash from cash machines or for using it overseas for purchases or withdrawals. You’ll get hit immediately by expensive credit card charges.
You should also take care not to gamble using your credit card, or to buy gift cards or gift vouchers, as these might be charged as cash withdrawals.
3. Choose another card
Any time you’re faced with the prospect of APRs of 15% or more, you should say “No thanks!” Don’t take such offers as a lifeline, but as a ladder they lend to you – which starts burning under your feet when you start climbing.
Unless you can pay off your debt within four or five months, you should always switch to a 0% deal or another very cheap deal.
4. Don’t choose cards for add-ons or pay extra for them
Follow the general rule that you avoid paying annual or monthly fees and premiums for add-on insurance and other benefits, and you can usually expect to save a lot of money on things that are often over-priced and don’t add much to your statutory legal rights.
Dismiss any free add-ons as gimmicks, rather than letting them sway you to choosing one card over another with a better deal.
5. What you don’t want to hear
Although the four rules above will stop most major problems, this fifth rule is unavoidable if you want to be confident of avoiding expensive surprises.
In addition, read every statement as soon as it arrives. Don’t just look at the transaction history, but at the statement dates and payment dates, and the direct-debit dates if shown, to see if any of them have been moved.