Five good credit card habits
1. Set up a direct debit
Whether you are paying your balance in full or just paying a set amount each month, a direct debit will prevent you from forgetting a payment and the charges and hassle that it involves.
2. Know your deal
If you are on a 0% interest balance transfer or purchase deal, make a note of when the 0% rate ends and make sure you clear the balance or switch to another card before then.
3. Check your bill
4. Pay more than the minimum payment
Pay a fixed amount off your card each month rather than just the minimum payment, so that you clear your debts as quickly and cheaply as possible.
5. Use your card for big purchases
Even if you can afford to pay in cash, use your credit card for purchases of £100 to £30,000 to get the extra protection from the Consumer Credit Act 1974.
Credit card fraud
Credit cardholders can be defrauded in a number of ways: “skimming”, when someone copies the data from your card’s magnetic strip onto another card without your knowledge (in shops, bars and restaurants); stolen or lost cards being used by thieves; and postal interceptions where the card the bank sends you never gets delivered. Another way is through identity fraud, where criminals get hold of a utility bill, a bank statement or some other form of personal information so that they can take out credit cards, loans or mortgages in your name.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.