Five credit card catches and how to avoid them

Credit cardsEven if you have taken the time to ensure that you are on the best credit card deals, the banks often use sneaky tricks to try to squeeze some extra cash out of you.

That's why we have come up with a list of five of the most common catches that could easily end up costing you - unless you know how to avoid them.
Varying interest rates
An all-rounder credit card that offers 0% introductory deals on both purchases and balance transfers could seem like a great one stop shop. The Virgin Credit Card, for example, is currently offering a very attractive 13 months interest free on both new spending and debts transferred form other cards. However, once the 0% period comes to an end, the interest rate charged is 18.9% for purchases and a massive 20.9% on any balance transfers not yet cleared.

The best way to avoid falling victim to this trick is therefore to ensure that you have cleared the balance before the introductory period comes to an end.

Balance transfer fees
The card with the longest 0% balance transfer deal is the Barclaycard Platinum at 20 months. However, the balance transfer fee paid when you switch debt on to the card is set at the higher-than-average level of 3.2%.

Consequently, you may be better off going for a card with a slightly shorter 0% offer and a lower fee. Virgin is currently marketing an offer that gives you 16 months at 0% on balance transfers and has a fee of just 1.5%, which may well prove a better deal depending how much you need to transfer and how quickly you plan to pay it off.

If, for example, you have debts of £3,000 to transfer and plan to make monthly repayments of £100, you will be better off with the Barclaycard Platinum.

However, if you can afford to up your monthly repayments to £250, then the Virgin deal will work out at a total cost of just £45, versus £76 with the Barclaycard.

Overseas charges
Many credit card companies impose fees and charges for overseas usage, with fees of up to £45 based on five transactions of €200 not uncommon.

Use the Halifax Clarity Credit Card or the Santander Zero Credit Card, however, and buying goods or paying for meals worth €1,000 will cost you just £870.91 as these cards have no charges for use abroad.

If you plan to use your credit card to withdraw cash while overseas, meanwhile, remember that even cards designed for overseas usage will generally charge you interest from the day you make the withdrawal.

The exception is the Sainsbury's Gold Card, which offers an interest free period on cash withdrawals, as long as you pay off the transaction in full at the end of the month.

Late payment penalties
You will be charged a fee if you miss a payment on a credit card, even if you are only a day late. These fees used to be as much as £25 or £30, but are now generally set at £12.

Even at this lower level, however, racking up a few late payment charges can still have a major impact on the amount you pay for your debt in total – not to mention have a devastating impact on your credit score.

If you are taking advantage of a 0% offer, it is also worth pointing out that banks can terminate the deal if you miss a payment date, even if it is your first slip up.

Setting up a direct debit to ensure this never happens to you is therefore doubly important if you don't want to be hit with high interest charges.

Inactivity/annual charges
Some of the best credit cards have annual fees, so it is worth checking this before applying.

The Sainsbury's Gold Card mentioned above, for example, charges £5 a year, although given the benefits and the travel insurance offered with the card, this may well prove worth paying.

Other cards will also impose charges for customers who stop using their cards. Consequently, it is a good idea to only hold on to the cards that you use regularly.
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