We've totted up all the ways that credit cards can rip us off and have reached the staggering total of 19.
It doesn't matter how sensible you are with them, credit cards comes with many booby traps. As one trap is shut down, two more take its place. We put the total at 19. If you can think of any more, please comment at the bottom of this article.
1. The debt that doesn't die
Many cards require minimum payments that barely cover the interest, meaning your debt won't go down. Once in a while a card appears where the minimum payment is so low that your debt actually grows! Read more abotut this trick.
So whatever you do, don't pay the minimum payment unless you're on a 0% deal.
2. Negative payment hierarchy
Negative payment hierarchy has to be the most devious trick, costing us collectively £500m a year. When you pay off part of your balance, it goes towards your cheapest debt first (i.e. to your 0% transfer deal). If you also have a purchase on the card at, say, 18% APR, that will remain on the card racking up interest till your transfer is paid off! Read more about this trick
The easiest way to avoid this is to use your card for transfers or purchases, but not both, and never for withdrawals or cheques.
3. Hidden cost of transfer fees
Interest-free balance-transfer credit cards are unquestionably cheap, but they're more costly than they appear. A 3% fee could cost between 4% and 11% APR! Read more about this trick
To get the APR and cost down, go for a lower fee and longer deal, pay the minimum amounts and save up in a decent savings account to pay the balance off at the end of the deal.
4. Transfer fee costs you interest!*
After you transfer a balance, the fee is added to your debt, but some cards will charge interest on the fee by classing it as a purchase - right up till the whole debt is paid off.
Read the small print carefully and complain if this happens without warning.
5. Typical APRs not typical
Lenders will give the 'typical APR' to those with the best credit scores, a higher rate to twice as many people, and either reject the remainder of applicants or get commission by passing their details to a more dodgy lender.
Don't take out products offered by third parties. If you are rejected for credit, check your credit report for errors and try to improve your rating.
6. High/increasing standard rates
Even if you get a typical APR, they're usually extortionate, averaging 10 percentage points above the cheapest personal loans! Plus, some lenders, such as Egg, recently hiked the APRs for existing customers dramatically.
Don't ever pay the standard rates; switch to a better deal.
7. APR jiggery pokery*
According to Which?, there are at least 12 different ways for lenders to calculate credit card interest, making a mockery of APR!
Expensive jiggery pokery is more limited if you stick to cards with 0% deals and avoid cards with numerous of fees and charges.
8. 'Cheap' monthly interest*
Some lenders big up the 'low' monthly interest rates, but 1.5% per month equates to 19.6% APR, which is higher than average. Don't be fooled.
9. Credit limit 'rewards'
Lenders may 'reward' you with a greater credit limit, but don't see this as a new target!
10. Over-priced protection
The insurance protecting payments that you'll be offered is hideously expensive.
Cancel these insurance policies, search the Web for a stand-alone provider and buy for 1/10th of the cost.
The same usually goes for any theft or fraud insurance policies that you are offered. Plus, you have good protection for fraud or theft under the law already, with liability against fraud limited to £50.
11. Insurance you didn't want*
The crisis is causing desperate measures, with some lenders charging you for insurance when you said you 'No!'
Take a copy of your application form as evidence and complain if this happens to you.
12. Small errors are big mistakes
All it takes is one late payment. You'll be fined £12, but that's just the start. Expect all introductory deals to end immediately and to pay the full APR.
Set up a direct debit. If your mistake is one off, call and appeal. If your appeal fails, switch to another card or loan.
13. Credit cards are not for withdrawals
The cost of cash withdrawals is immense, with a typical 2.5% fee, interest charged at 25%+ APR and no interest-free period.
There's a simple solution, however. Don't withdraw cash from your credit card!
14. Credit cards aren't cheques!
Cheques are just as expensive as cash withdrawals, with up front fees, 25%+ APRs and no interest-free period.
Again, do not use them.
15. Don't use your card abroad.
You'll usually pay an extra 2.75% for purchases and withdrawals on a credit card abroad. Most debit cards also charge hefty fees. Consider this card instead.
16. The price of perks*
Lenders love to offer you perks, for a fee, because it's very profitable.
Add up the worth of the benefits that you're likely to use and most people will find it's not good value for them.
17. Because moving home is too cheap*
If you move house, it may be that your provider will add a fee to your statement a few months later. I'm sure that it's only large enough to cover their admin costs. Not.
18. Penalties for not borrowing*
If you don't use your card for a year, you may pay monthly penalties until you do! Similarly, penalties for having a positive balance have happened in the past, so watch out.
Use your card for Internet and big purchases, which gives you more protection than a debit card if something goes wrong. Just remember to pay your whole bill off.
19. Playing for time*
Lenders might move your statement date closer to your payment deadline, leaving you less time to pay up.
Set up a direct debit for a fixed date some time before the deadline.
Finally, pay off your debt in full each month if you can. That stops the vast majority of these problems.
*Those marked with an asterisk are relatively rare, often coming and going, but the rest apply to more than 80% of credit cards.
More: Why your 3% balance transfer fee costs 11%! | When you should say no to a best buy loan
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