Five great tips to avoid those credit card ‘hidden extras’!

3rd June 2012  

Despite the onset of a ‘double-dip’ recession and promises that we haven’t even started to feel the worst of the government’s austerity plans, people are still using their credit cards to pay for everything from the weekly shopping, filling up the car and even booking a last-minute holiday. But credit card users beware – there’s a myriad of different ways that your credit card could end up costing you more than you thought. Card issuer’s statistics show that 50 million UK credit card users end up paying ‘hidden extras’. These are the small but avoidable charges that you often get hit with if you aren’t careful to operate your credit card within its Terms and Conditions. So here are our five top tips on how to avoid getting stung…

#1 – Pay on time, every time

If things are tight it may be tempting to let a monthly payment slide – just this once. But do that, or even put off paying the monthly installment until a few days after the due date and you could be faced with a big penalty charge on next month’s bill. You could even lose that all-important 0% interest rate if you’re not careful (check your small print). Worst of all, you’ll have a black mark on your credit history that will take 6 years to remove. Avoid this costly mistake by setting up a direct debit payment so that you never ‘forget’ an installment.

#2 – Watch out for charges abroad

Taking the plastic with you on holiday may be an easy way of carrying cash around, but beware – some credit cards charge a hefty surcharge for overseas transactions. A good way of avoiding these charges is to transfer some money onto a pre-paid card before you go away, and keep the credit or debit card in reserve for absolute emergencies only. (Here’s more on overseas credit cards which will help you minimise charges).

#3 – ATM charges – a nasty surprise

While most UK ATM machines don’t charge for cash withdrawals, there are some that do – and the charge can be considerable. Check before you punch in your PIN number that the ATM machine provider isn’t going to charge you for your transaction. Not only that, most credit cards also hit you with a big surcharge (usually 3%) for making a cash withdrawal. Card issuers will also charge you a substantially higher rate of interest on cash withdrawals, so check your statement to see how much interest you are being charged for cash advances.

#4 – Order of payments

Although the order of payments issue was supposed to have been tackled last year, there are still some credit card providers that are using some rather ‘underhand’ tactics to get around this legislation. The ruling was that providers have to put your payments against the most expensive portion of your debt first, but some providers are allocating payments in chronological order. This means that they are putting them against your oldest debt for the first month or are allocating them to your most expensive reversionary rates. While this is quite a technical issue, it does pay to check your small print and ensure that you’re not getting stung with excess charges.

#5 – Minimum payment – if you can afford more, pay more

Many people are eking out their meager income by paying the bare minimum payment on their credit card each month. But this will extend the life of your debt and mean that you end up accruing extra amount of interest. If you can pay off more than the minimum monthly amount (usually 2.5% of the debt), do so. If not, then look to transferring the debt over to a 0% interest card to give yourself a fighting chance of paying the debt off in a much shorter period of time.

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