These are the customers that rake in the profits for the banks' card divisions, subsidising those other customers that just use the cards to take advantage of 0% interest offers. Here are our top tips to avoid becoming one of those customers.
Withdrawing cash
Withdrawing cash from a cash machine using a credit card is akin to throwing money away and should only be resorted to if you are truly desperate. Most card issuers now charge a 2% to 3% fee for cash withdrawals and charge interest on the withdrawal straight away, rather than giving the customer the standard 50 days-plus interest free period on normal card purchases. It is also likely that you will be charged a higher APR on the card.
Credit card cheques
This is similar to withdrawing cash - you will be charged interest straight away with goods purchased using a credit card cheque. Credit card firms have been heavily criticised by a Government body that reviews the credit industry for sending out unsolicited credit card cheques to customers, particularly ahead of key spending periods, such as Christmas or the school summer holidays. If you are going to use the cheque, why not just use the card instead? The APR charged on credit card cheques is also usually much higher than the standard APR.
Overseas charges
Taking the wrong debit and credit card on your holidays can add nearly £100 in fees to the cost of the trip. It is estimated that banks rake in around £500m in extra charges from the £20bn customers spend when using cards overseas.
Our research shows Nationwide is the cheapest mainstream provider. Nationwide's debit card on its current account also stands out as being far cheaper than those offered by High Street rivals.
Long-term borrowing
Using the wrong credit card for long-term borrowing is only slightly less favourable than visiting the local loan shark. With so many cheap loans around, there is very little point in funding a long-term debt through a credit card that charges interest starting at 12% APR. The cheapest deals on the loans market currently start at 5.6% and there are a number that charge less than 6%.
However, there are some cards that have recently come on the market to target this sector and could be worth considering.
Minimum repayments
Credit card issuers love customers who make only the minimum repayment each month because it means that they will have that customer for years and take a large chunk of the repayment in interest. Paying just 1% above the minimum monthly repayment could shave 13½ years off the time it takes to repay a £3,200 debt.
Most card providers request customers make a repayment of 2% of the balance, but by paying 3% of the above debt, they would also shave £1,500 off the total bill.( thisismoney.co.uk )
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