10 Credit Card Traps to Avoid
Posted April 20th, 2009 There are quite a few nasty things credit card companies can do to wrangle a little bit more money from you, and if they do this enough over time, it adds up. So have a look through our guide and make sure you read your statement!
1) Increasing Interest Rates
The simplest thing for banks to do is to raise their interest rates. They need to inform you of this, but they can do it in a statement, so make sure you pay close attention to your credit card statement. What’s particularly galling is that this is happening right now, as interest rates hit zero percent in the UK!
2) Minimum Repayments
One really easy way to make your credit company provider happy is by making the minimum repayment on your credit cards. It can take years and years to repay your debt by making the minimum payment. The best advice is to pay as fast as you can, to minimise the amount of money you pay to the financial institutions.
3) Overseas Charges
When you use your card overseas, you can be charged up to 3% per purchase. If you take money out, they can charge you an extra 3%, meaning for each £100 you spend overseas, you can be charged £6.
4) Balance transfer fees
The dark side of balance transfers, what isn’t immediately obvious when you sign up for a 0% balance transfer is that the credit card companies will charge you when you transfer your balance. In spite of this balance transfers are still a great deal, the Virgin Credit Card charges you just under £30 for each £1,000,, but if you left that on a credit card with 16.9% p.a. rate for 12 months, you’d end up spending £169, so the Virgin credit card could save you £139 over the course of a year.
5) Negative Payment Hierarchy
The way that credit card companies make money from balance transfers, aside from the fee, is by having a negative payment hierarchy, which means that any money you repay will contribute towards the balance transfer amount, rather than the purchase amount, meaning that you always end up paying money on any purchases. The way to avoid these charges is to have 2 cards, 1 for balance transfers and 1 for purchases.
6) Late payment penalties
If you’re late in paying your credit card balance, then you’ll get charged, around £12. You’ll also get a black mark in your credit history. The simplest way to avoid this is to setup a direct debit to pay the minimum payment each month. The best way to avoid this is to pay off the entire balance each month.
7) Reducing Interest Free Days
Most people assume they get 56 days interest free, but this generally ranges from 50 days for the Virgin Credit Card, down to Zero days for the Lloyds TSB Advance MasterCard.
Cash advance charges
Each time you withdraw cash from your credit card you’ll get charged, something in the region of 3% of the amount you’ve withdrawn. You’ll also get stung with interest straight away – when you withdraw cash on your credit card, you get no interest free period.
9) Payment protection insurance (PPI)
To rub salt into the wound, Credit card companies try to sell you payment protection insurance, which is a good idea in itself, but the prices that they charge are generally outrageous; £120 a year.
10) Other charges
The credit card companies don’t just have these tricks up their sleeves. Make sure you thoroughly check your statement each month to beware of any additional charges.
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Comparison of Top 10 Credit Card Offers
| Credit Card | Card Details | Interest Rate | Cash Advance Rate | Balance Transfer Rate | Annual fee | Interest free days | ||
|---|---|---|---|---|---|---|---|---|
 Halifax All in One Credit Card |
The Halifax All in One credit card offers a great introductory rate, and is perfect for saving you money now as well as in the future. | 15.9% APR | 27.95% p.a. (variable) | 0% for 9 months | No Annual Fee | 59 Days interest free |
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 Virgin Credit Card |
As well as a great rate, the Virgin Credit Card comes with:
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16.6% APR (variable) | 27.9% p.a. (variable) | 0% for 16 Months (2.98% fee on balance transfers) | No Annual Fee | 50 days on card purchases |
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 Capital One Classic Visa |
This card is designed for people with bad credit ratings, this is why the rate is quite high. |
Typical 34.9% APR variable | 34.9% APR | 34.9% APR | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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As well as earning Flying Club miles which you can spend on brilliant rewards like flights, upgrades, car hire and more, a Virgin Atlantic Credit Card gives you up to 46 days interest free on card purchases. |
17.9% APR typical rate | 20.9% p.a. (variable) | 0% for 6 months (2% handling fee) | No Annual Fee | Up to 46 days on card purchases only. |
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The Virgin Prepaid MasterCard from Virgin Money is a prepaid Mastercard that you can add funds to, and use these funds for normal purchases. |
N/A | N/A | N/A | N/A | N/A |
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5% cashback on purchases in your first three months (up to £4,000 of spend). Thereafter, earn 0.5% on the first £3,500, 1% on £3,501 to £10,000, and 1.5% after £10,001. |
18.9% p.a. | 27.9% p.a. | 18.9% p.a | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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Vanquis Visa Card is designed for people with no credit history or who have previously had bad debt. |
39.9% APR variable | 39.9% | 39.9% | No Annual Fee | Up to 56 days on card purchases only |
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The award winning prepaid card with no credit check or bank account needed. | Funds in your Account will not earn interest | Prepaid only - N/A | Prepaid only - N/A | £59.40 p.a. (£4.95/month) | Prepaid only - N/A |
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