How to play your cards right

Almost half of us have a credit card and the amount we spend on them is steadily rising. In just one month – November 2015 – we spent £15.5 billion on our plastic, up 7% on the previous year, according to the UK Cards Association.

But while we are all using credit cards more and more, we may not be using them wisely. Many of us are racking up credit card debt that could take us decades to clear.

The average household owes £2,336 on their credit card. Assuming average interest rates, it would take 25 years and five months to clear if you repaid the minimum payment each month, according to The Money Charity.

“The growth in consumer confidence has led to higher spending and – inevitably – more borrowing,” says Kevin Pratt, content editor at MoneySuperMarket. “Personal debt has shot up by 38% in the past two years and many of those who already owe money are expecting to borrow yet more in 2016.”

Whether you are one of the many people with credit card debt, or you pay off your balance in full each month, there are ways to get more from your plastic.

Never pay interest

A battle for customers between credit card providers means there are a whole host of interest free deals. If you have an existing credit card balance, you can move on to an interest-free balance transfer deal and give yourself ample time to clear the balance without paying interest.

People “should take a look at the rate of interest they are paying on their credit cards, as there are so many great deals out there", says Nerys Lewis, head of credit cards at

“By knowing your spending needs, you can find a suitable credit card, with the right interest rates and, in the long run, save money.”

The longest deal is 38 months on the Tesco Bank card. But it isn’t just about the length of the deal: you also need to look at the balance transfer fee.

This is a percentage of your debt that you’ll pay for moving your balance from one credit card to another. It can be as much as 5%, so watch out. The Tesco deal has a 2.7% fee.

If you plan to buy something expensive, then consider a 0% purchase credit card. These cards don’t charge any interest on purchases for a set period of time. Post Office Money offers a card with 0% on purchase for 27 months.

To find the right card for you, take a look at our comparison section, where you can compare different cards. But always repay your card in full before the 0% period ends, or the interest rate will rocket. You also need to make at least the minimum repayment during the 0% period.

(These product recommendations were correct as of March 2016. See our credit card hub for the best 0% credit card deals, cards for rewards and cashback and best credit cards to take abroad each week)

Use your card to stop paying interest on personal loans and overdrafts

Normal balance transfers can only be used for credit card debts, but some deals allow ‘money transfers’ where the cash is paid into your current account, so you can pay off a personal loan or overdraft at a lower interest rate.

Again, you need to watch out for the transfer fee, which is usually higher than a standard balance transfer deal. A good option is Virgin Money, which offers a card with 0% on money transfers for 32 months with a 1.69% fee.

Get paid to shop

If you don’t have any credit card debt and you know you can pay off the balance in full each month, then you don’t need to worry about interest rates for purchases. Paying off what you spend within 30 days means you shouldn’t be charged any interest.

This means you should take a look at credit cards that offer rewards such as cashback, airmiles or loyalty scheme points.

Cashback is the simplest reward as it can’t be devalued by the credit card provider and you don’t have to jump through hoops to spend it.

American Express tends to offer the best rewards cards, but be aware that its cards won’t be accepted everywhere.

For example, American Express Platinum Cashback offers 5% cashback for the first three months, then 1.25% cashback thereafter. Watch out for the £25 annual fee.

A credit card can help you buy a house

Use a credit card wisely and it can help you in ways you never imagined. For example, having a credit card that you use and pay off each month helps you build up a credit history.

This is invaluable when you want to borrow in the future – for example, if you need a mortgage – as it shows potential lenders that you have been a responsible borrower in the past.

So even if you don’t need a credit card, consider using one for a small amount of spending each month. It could make a difference if you ever need to apply for credit.

Avoid being rejected

Applying for a credit card can be a tricky business with many people being rejected with no clue as to why. Every time you apply for a credit card, it is noted on your credit file. Multiple applications in quick succession look bad to other lenders who worry why you are making so many failed applications.

This can create a vicious circle of you being rejected for being rejected. The reason for this is because credit files don’t say if you’ve been accepted or rejected, but they log every application.

Avoid this by using a comparison website to do a ‘soft search’ first. This means they will check which credit cards you are likely to be accepted for based on a few questions, but it won’t leave a footprint on your credit file. You can then choose a card you are likely to be accepted for.

If the results of the soft search surprise you, take the time to check your credit file via a reference agency such as Experian or Equifax to see if there are mistakes or black marks on your file that are affecting your applications.

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