You are here: Home - Credit Cards & Loans -

Avoid credit card pitfalls

0
Written by:
01/06/2012
Comparison website MoneySupermarket has conducted analysis into a range of costly credit card ‘pitfalls' to help people avoid paying over the odds on fees and transactions.

Comparison website MoneySupermarket has conducted analysis into a range of costly credit card ‘pitfalls’ to help people avoid paying over the odds on fees and transactions.

Credit cards are an important part of the nation’s finances and two-thirds of credit cards held by UK consumers currently bear interest. Falling foul of the terms and conditions of a credit agreement can lead to mounting penalty fees and have a negative impact on personal credit reports.

Late/ missing payments

Consumers should avoid missing payments or making late payments on their credit card balances. This would result in additional charges and in some cases the loss of any promotional rates (i.e. 0% on purchases). Not managing your payments properly can leave a black mark on your credit score. For example, a credit card user missing a first payment on a 12 month, 0% purchase credit card deal could be charged an additional £206 in interest over the 12 months if the promotion was removed and they defaulted to an average rate of 17.31%.

Earlier this year, MoneySupermarket found more than one in Brits missed a payment for at least one bill in the last 12 months. Credit cards came out on top as the most missed payment; three million people had not paid their credit card bill in time over the last year (7%).

Paying only the minimum amount

While many people pay off more than the minimum each month, MoneySupermarket calculated that someone with a balance of £1,500 on a card with an average APR of 17.31%, making only the minimum repayment of 2.5% each month could take 19 years and 3 months to clear their debt. To add insult to injury, they would also end up forking out an extra £1,590 in interest payments in the process.

Cash withdrawals

A cash advance, in most cases, is charged at a much higher rate of interest than standard purchases on the card, with the interest also accruing from the date of the transaction. For example, consumers on an average APR of 17.31% withdrawing £500 in cash will find themselves being charged 26.72%, 9.41% higher and at a cost of £3.25 more.

Kevin Mountford, head of banking at MoneySupermarket.com said: “As with any financial product, credit card holders must ensure they understand the terms and conditions or they could pay more than they realise for certain types of transactions.”

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
2179560-david-fisher-cpi
OFT issues guidance on misleading trading names

The OFT has issued guidance on misleading or otherwise undesirable trading names to businesses offering credit services or products. Among...

Close