It’s no secret that credit card companies can be a little unscrupulous. There are all sorts of tricks that they use to ensure that they are making money from you in as many creative and ingenious ways as possible.
For example, you may have assumed that making a larger payment than the monthly minimum would mean that you are paying off your card quicker than if you simply make the minimum payment. Unfortunately, there are a large number of companies that have found a way to make sure you keep paying the maximum amount of interest.
Credit card overpayments can cost you more
Many card companies including Santander, The Bank of Scotland, Halifax, Lloyds TSB and Barclaycard have all come up with a trick to counteract the benefits of making an overpayment on your credit card. If you pay more than the minimum amount one month, they will reduce your payment the following month, making that overpayment a complete waste of time.
If you are paying more than the minimum to reduce your debt faster and pay less interest, you really need to be aware of this trick. Paying just 50 extra could result in savings of up to 40 on the interest alone, so it’s little wonder that the card companies have found a way to get around this. Keep a close eye on your statements to make sure that your card company isn’t doing this to you too.
How to avoid other credit card cons
There are more than 40 different tricks that the credit card companies use to ensure you are paying the maximum amount of interest to them. Some of them are quite complicated, so you really need to be aware of what they are doing to maximise their profits. Here are some tips to help you safely use your credit card and avoid paying more than you have to on your debt.
Set a monthly budget that will allow you to overpay as much as you can on a regular basis. This will help you to get the balance down faster and save you money on interest. You also need to remember that even with a 0% interest card, you’ll need to make the minimum payment every month or face penalty charges plus damage to your credit score.
If you are on a 0% deal and only paying off the minimum, aim to put away the difference into a savings account so you can clear the balance at the end of the promotion. There’s no guarantee that you will be able to transfer the balance onto another deal once your current promotion expires.
Never use credit cards to withdraw cash, whether domestic or foreign currency. You should also never use your credit cards for gift vouchers or gambling. Cash advances cost you more, so read the fine print carefully before you make a withdrawal.
Shop around to get the best APR (standard interest rates). Make sure you know when any introductory offers are coming to an end and switch providers before you get landed with extra interest payments.
Check your statements carefully to make sure you aren’t getting extra charges put on your bill. Also be wary of any credit card that offers “exclusive” financial services products such as insurance or travel deals.
Always check your statements carefully and don’t be tempted to max out your credit limit. If you believe there has been some discrepancy, contact the Financial Ombudsman Service and you’ll receive advice as to whether you have been mis-sold.