Chances are, you've got a credit card in your purse or wallet. These cards are part of everyday financial life for millions of Brits. But it's important to check every now and again to see you've got the best card for your needs.
Not all cards are the same, so it could well be worth switching to one that offers you a better deal in terms of cost, flexibility and value.
To help you maximise the benefits of having a card, and to make sure you avoid any costly mistakes or unnecessary expense, check out MoneySuperMarket's six top tips for getting the best out of your plastic.
1. Prioritise your monthly payment
The ideal way to run your credit card is to clear your balance in full by the 'payment due' date every month. That will mean you don't get charged interest, which is usually levied at close to 20% APR. That's not always possible, of course, especially after a major purchase. But do what you can to pay more than the minimum required – you'll clear your debt more speedily, and reduce what you cough up in interest.
Whatever you do, don't miss a payment, even if it is only the minimum. If you skip a month, you'll face three hits:
- a penalty charge of, say, £12
- a black mark against your credit score, which will make it difficult to get credit in the future
- the loss of any promotional rate or other benefit that came with the card
Balance transfer credit cards allow you to shift an existing credit card debt to a card that won't charge interest for a stated period. You have to pay a fee, which is calculated as a percentage of the amount you're transferring. So moving a £800 balance to a card that charged a 3% fee would cost you £24 – worth paying if you're going to dodge paying a high rate of interest for a number of months.
One option at the moment is the Tesco Clubcard credit card for Balance Transfers and Money Transfers, which charges 0% on balance transfers for 40 months, after which the interest rate is levied at 20.626% (variable).
The balance transfer fee is 2.69%, and you have to transfer your outstanding balances within the first 90 days of opening the account.
A money transfer is where you move funds, via your card, to your current account. You could then use the cash to clear another debt, such as an overdraft.
If you use this Tesco card to transfer money in this way, you'll pay no interest for 40 months on the amount you move, this time subject to a 3.94% fee (if you carry out your transfer within 90 days). After the 40 months are up, you'll pay 20.262% pa (variable). The card has a representative rate of 18.9% APR (variable)* and this offer ends on July 7.
With transfer cards, the aim should be to clear the balance within the interest-free period, so it's worth working out how much you need to pay each month to achieve this. For example, if you move over a balance of £800, you'd need to pay £20 a month to clear the debt within 40 months.
3. Be disciplined – set up a direct debit
If you need to pay a certain amount each month to clear a balance in time, or if you just need a way to avoid missing a monthly payment, set up a direct debit in favour of your credit card.
4. Spread the cost of a big-ticket purchase
Some credit cards come into their own when you're buying an expensive item. Just as 0% balance transfer cards have a period when they don't charge interest on the debt you move across to them, so 0% purchase cards have a period when they don't charge interest on what you spend on them.
A good example at the moment comes from the Post Office. Its Matched credit card offers 27 months at 0% on purchases, after which you'll start paying interest at a rate of 18.9% pa (variable). The card has a representative APR of 18.9% APR (variable)*.
5. Earn cashback or get a reward with your card
If you clear your balance in full every month and thus avoid paying interest on your card, you might want to think about a cashback or reward credit card deal.
With these cards, a percentage of what you spend is paid back to you, either as cash, a reduction in your bill, or a 'reward', such as redeemable points you can use when shopping.
For example, the American Express Platinum Cashback Everyday card offers 5% cashback on all spending up to £2,000 in the first three months (so that's up to £100). After the first three months, the amount of cashback you get depends on how much you spend in each 12-month period. The rates are:
- 5% cashback for spending up to £3,500
- 1% cashback for spending between £3,501 and £7,500
- 1.25% cashback for spending over £7,501.
To get the card in the first place, you'll need to spend at least £3,000 in a year. It's representative rate is 22.9% APR (variable)**, and terms and conditions apply.
As far as so-called 'reward' cards are concerned, the M&S credit card allows you to earn M&S points every time you shop – you'll earn one point for every £1 you spend in M&S and one point for every £5 you spend elsewhere.
If you successfully apply for this card, you will also receive 500 M&S points worth £5 when you use the card to buy food, clothing or homeware at M&S with your card.
Apply through MoneySuperMarket and you'll get a £30 voucher to spend at M&S. The offer runs until 20 June. T&Cs apply. The card offers 19 months at 0% on purchases, followed by 18.9% pa (variable). The card has a representative rate of 18.9% APR (variable)*.
6. Only apply for a card you have a good chance of getting
If you apply for a credit card and aren't successful – maybe because you're credit score isn't fully up to scratch – you're likely to inflict further damage on your credit rating. But how are you supposed to know in advance whether you'll be turned down or not?
One way is to use the MoneySuperMarket Smart Search tool. You simply click on
'Find a credit card', enter a few details, and you'll be given a list of credit cards along with an indication of how likely you are to be accepted.
*Representative example: If you spend £1,200 at a purchase interest rate of 18.9% pa (variable) your representative rate will be 18.9% APR (variable).
**Representative Example: If you spend £1,200 at a purchase interest rate of 22.9% p.a. (variable) your representative rate will be 22.9% APR (variable).
All credit cards are subject to status and terms and conditions. Over 18s, UK residents only. Terms and conditions apply. See MoneySuperMarket.com for further information.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.