| BANKS and card providers love customers that have a laissez faire approach to their credit cards. The kind of customer that takes no interest in the rate of interest they pay, how they use the card or how much they pay off each month.
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Credit card CARD FLUTTER: Using your cards wisely could save you hundreds of pounds
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CREDIT CHECK
Alan O'Sullivan Improving your credit score will give you access to cheaper borrowing rates.
›› Alan explainsThese are the customers that rake in the profits for the banks' card divisions, subsidising those other customers that just use the cards to take advantage of 0% interest offers. Here are our top tips to avoid becoming one of those customers.
Withdrawing cash
Withdrawing cash from a cash machine using a credit card is akin to throwing money away and should only be resorted to if you are truly desperate. Most card issuers now charge a 2% to 3% fee for cash withdrawals and charge interest on the withdrawal straight away, rather than giving the customer the standard 50 days-plus interest free period on normal card purchases. It is also likely that you will be charged a higher APR on the card.
Credit card cheques
This is similar to withdrawing cash - you will be charged interest straight away with goods purchased using a credit card cheque. Credit card firms have been heavily criticised by a Government body that reviews the credit industry for sending out unsolicited credit card cheques to customers, particularly ahead of key spending periods, such as Christmas or the school summer holidays. If you are going to use the cheque, why not just use the card instead?The APR charged on credit card cheques is also usually much higher than the standard APR. For example, NatWest charges 20.89% interest on its Classic credit card cheques – 20% higher than the standard APR of 16.9%. Mike Naylor, a researcher with Which?, says: 'Credit card cheques cost more than paying by card and give less protection and as a result are best avoided.'
Overseas charges
Tropical beach
Taking the wrong debit and credit card on your holidays can add nearly £100 in fees to the cost of the trip. It is estimated that banks rake in around £500m in extra charges from the £20bn customers spend when using cards overseas.Our research shows Nationwide is the cheapest mainstream provider. If you don't get a special 0% interest rate then remember to clear the debt when you return from holiday or move it on to a special deal card, otherwise you will pay Nationwide's APR of 14.9%. Nationwide's debit card on its current account also stands out as being far cheaper than those offered by High Street rivals. Check out what the High Street banks charge here. Long-term borrowingUsing the wrong credit card for long-term borrowing is only slightly less favourable than visiting the local loan shark. With so many cheap loans around, there is very little point in funding a long-term debt through a credit card that charges interest starting at 12% APR. The cheapest deals on the loans market currently start at 5.6% and there are a number that charge less than 6%.
Help with credit cards
• This is Money has guides, expert advice and calculators that make choosing credit cards easier. We can also point out the best credit cards to suit you: Source: www.thisismoney.co.uk/credit-and-loans |
