Credit card charges can quickly mount up, especially if your card provider adds unexpected fees and interest to your credit card bill. Managing your account responsibly, and keeping an eye on your spending habits, helps to lower the cost of your credit card bill, but there are also other ways to reduce the fees and charges added to your bill. Avoiding these 5 common credit card mistakes will save you money and reduce the charges added to your credit card bill.
Making minimum repayments
Paying only the minimum amount requested by your credit card provider is one of the most expensive mistakes you can make. The longer it takes to pay off your bill, the more interest and charges you will accumulate. While financial circumstances may make it difficult to clear the balance of your account, paying just 1-2% more than the minimum amount requested can bring significant long-term savings. Assess your personal finances to see if there is any way you can afford to pay a little extra off your credit card account, as this will save you money in the long run.
Accumulating missed payments
Failing to make the minimum payment each month will lead to a one-off ‘missed payment charge. While this may be unavoidable from time to time, the cost of regularly missing your minimum payments can quickly mount up. If you are struggling to pay your household bills, it is important to prioritise. Credit card bills, along with other bills that will incur extra charges if payment is not made, should be paid before other less urgent bills.
Making cash withdrawals
Using a credit card to withdraw money from a cash machine should always be avoided, unless it is absolutely necessary. Credit card providers usually charge a fee, often around 2-3% of the total amount withdrawn. In addition, the money that you withdraw from a cash machine will often be exempt from any interest-free period that has been agreed with your credit card provider. Typically, credit card providers allow their customers an interest-free period for new purchases, but this does not apply to cash withdrawals. This means that you will be paying interest on the cash amount as soon as it has been withdrawn.
Using the wrong credit card
Different credit cards offer different interest rates, terms and conditions, depending on the type and purpose of the card. Using the wrong type of credit card can hike up the cost of your bill. For example, using your regular credit card to make purchases in another country could add an extra £120 to your credit card bill. However, choosing a credit card that is specifically designed for use abroad can help to avoid these unexpected charges. Similarly, most regular credit cards should not be used for long-term borrowing, as the interest charges and associated fees can trap you in a costly repayment plan.
Failing to read the terms and conditions
All credit cards come with their own set of terms and conditions. These terms and conditions set out the rules and regulations that you are expected to follow, along with detailed explanations of any fees, interest rates, charges or other costs you may incur. Many people fail to read the terms and conditions associated with their credit card, and are often shocked when unexpected fees and charges appear on their credit card statement. Familiarising yourself with the terms and conditions laid down by your credit card provider is one of the best ways to avoid unexpected fees and charges. The terms and conditions will also explain what to do in the event of a dispute with your credit card provider.
Sam Jones, the author, has been investigating uSwitch Credit Cards to try and find the best credit cards to repair a slightly damaged credit rating.
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