Making the best out of your credit card is a fine art: it’s all about using it often, but not too much, and in the right way.
We’ve gathered our experts’ tips on the topic. Even if you’re a seasoned credit card user, there may be something you haven’t thought of yet.
Representative example: When you spend £1,200 at a purchase rate of 23.9% (variable) p.a., your representative rate is 23.9% APR (variable).
Just a revision of the basics to begin with. The correct way to use your credit card is clearing your balance in full every month, so that the card doesn’t start accruing any interests.
If you do and the card doesn’t charge an annual fee either, you can basically get monthly credit at no cost whatsoever.
Paying the minimum repayment amount allows you to avoid late repayment fees and also helps you preserve your credit score.
However, it isn’t a permanent solution and credit cards aren’t a good way of borrowing money in the long term because of their relatively high interest rates, so you should always pay off as much as you can.
Most credit cards charge an extra fee for cash advances, so it’s better to just get cash with your debit card if you can.
Moreover, cash advances often start accruing interest from day one, as interest-free billing cycles don’t normally apply.
It’s hard to keep up with all the admin work you need to do in order to manage your finances properly. We’re all busy people and forgetting to pay a bill on time is an easy mistake but has very concrete consequences, in the form of interest you’ll have to pay back.
Direct debits are easy to set up, will save you the hassle and almost all credit cards allow them as a payment method.
Knowledge is power, as they say. You can’t really figure out how to use your credit card in the best possible way if you don’t know what it offers or how much you’ll be charged.
It’s even more important to check if you’re planning on using it abroad.
One of the many factors that can impact your credit score is the so-called utilisation rate, which is based on how much credit you use compared to how much you have available.
You should keep your utilisation rate as low as possible, 30% should work just fine.
Budgeting is key to make sure you don’t lose track of your credit cards, but it can also be a very time-consuming task. Mobile apps can help with that.
Most banks and card issuers offer their own, but you could also consider an independent budgeting app, most of which allow you to connect all your accounts (current accounts, credit cards, savings accounts and so on) and manage them from the same place. They’ll also give you some cool insights on your spending habits, packaged in nice and colourful graphs.
Let’s say for example you have more than one card, you’re having a rough month and have to choose which of the two bills to pay. In that case, don’t go in blind.
Check which card charges the most and clear the balance on it first.
Unlike diamonds, credit cards aren’t meant to be forever. You can use a credit card until it’s good and then switch to a better deal anytime.
Keep an eye on what’s available on the market. We have a really nice credit card comparison table you can consult. Just saying.
In most cases, a good credit card at home isn’t a good credit card while travelling abroad. It’s worth having a second one that doesn’t charge any foreign currency transaction fees. Some cards don’t have an annual fee either, so you can just bench them until you leave the country without losing a single penny.
If you’re a frequent traveller, you should also consider dedicated cards that offer travel rewards, such as frequent flyer cards.
With rewards credit cards, it all comes down to finding the right balance between the rewards you earn and the annual fee you pay.
In general, the more you use them the merrier, but don’t forget about the utilisation rate (see point 6).
If you get a rewards credit card, you should use it as often as you can, especially if you’re paying an annual fee.
An easy way to do this is to use your credit card for regular expenses, such as your grocery shopping or your council tax.
Don’t fall into the trap. If you realise you’re not using your rewards card as much as you expected to and the annual fee isn’t worth it anymore, don’t compensate by making random purchases.
It’s way better to get a different card and close your old one. In many cases, you can get a partial refund of the annual fee you’ve paid.
Your rewards credit card should allow you to treat yourself, not change your long-established habits or make your life more complicated.
A card can be great and have a high earn rate, but if you can’t redeem the points for something you really want or care about, it’s time to look somewhere else.
Diversifying the rewards and perks you get from your cards is a good way to grant yourself a good variety of treats among which to choose.
A very basic way of doing it is getting credit cards with different issuers: many banks offer a set of basic perks that are the same with all their credit card options.
Everyone knows that American Express is great for rewards, but you can’t get any rewards if you don’t use your card. Think about where you live, where you usually shop, where you want to travel and if Amex is accepted there.
If you live in a city and mostly do your shopping at major retailers, you’re usually fine, but if you have a somewhat more rural lifestyle, you may be better off with a Visa or a Mastercard.
Balance transfer credit cards can buy you some time to pay off your debt and the best ones come with 0% on balance transfers for two years or more.
There will probably be an initial balance transfer fee, but it’ll still cost way less than the interest you’d pay if you kept your debt on a regular card.
Introductory offers are great, but banks are kind of counting on you forgetting that they ultimately come to an end. Whether it’s an introductory 0% on purchases, balance transfers or anything else, you need to be prepared for when it’s over and clear your balance as much as you can.
And if at the end of the introductory period the deal just isn’t good enough anymore, you can simply switch to another card.
Some credit cards tick more than one box, but the vast majority of them are meant to be used with a single, specific purpose, be it improving your credit score, helping you paying off your debt or offering great rewards.
For example, it can be very expensive to make purchases on a balance transfer credit card if you don’t pay off your bill in full every month (just like it can be very expensive to do a balance transfer on a 0% purchase credit card). If you have a variety of needs, it’s usually worth having more than one credit card.
Understandably, credit cards aren’t exactly our favourite topic for a pub conversation with our mates, but after all, we all need to take care of our finances, don’t we?
Refer-a-friend schemes make a nice and easy way to earn extra bonuses and rewards in return for very little effort.
Sometimes, especially with credit builder credit cards, card issuers give you the chance to review your credit limit after a few months of usage and paying your bill on time.
Take it. Even if you’re not planning on actually using the credit, it should help your credit score a little and you never know what the future holds.
Yes, it’s a boring admin job that we’d all very much rather do without. But you do need to know what’s going on with your credit card.
Look for transactions you don’t immediately recognise and contact your provider right away if you think something’s off.
Not using a credit card isn’t a problem in itself. You’ll have more credit available, so it’ll lower your utilisation rate and potentially help your credit score.
However, if you’re “benching” a card, you need to make sure you’ve cleared your balance in full first or it’ll start accruing interest.
Things are different if you’re paying an annual fee for a card you don’t use, you’ll just be losing the money without earning any rewards.
Call your card issuer to cancel your card and follow up with a written cancellation letter, just to avoid any nasty surprises.
Credit cards are very popular, but like we said, they’re no good for borrowing money in the long term.
If you have a specific project in mind like renovating your kitchen or an upcoming wedding, you should probably consider a personal loan, which will be much cheaper if you need the money for a longer period of time.
Your credit card should adapt to your lifestyle and add something to it, not the other way around. If you need to change your habits significantly to make the best out of it, then it’s probably not the right card for you.
Also, the basics are called basics for a reason. You can go a long way by simply drafting a budget, sticking to it, using your credit card accordingly and clearing your balance in full every month.
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