subject: How To Avoid Credit Card Mistakes [print this page] Considering their size - tiny - and the size of the UK appetite for them - huge - it's surprising just how complex credit cards are.
The vast majority of problems with these cards come consumers who either misunderstood what they were getting themselves into (i.e. got the wrong card for their needs or didn't know what their needs were) or missed a vital part of their credit card's terms and conditions.
These are, in general problems that are easily solved by doing a decent credit card comparison before signing up with a new lender but you have to know what you're looking out for in the first place in order to avoid it.
That's where the following list of common credit card mistakes comes in: it may not be exhaustive but it covers the major points and could help you doing the wrong thing with your plastic in the future.
The first points come before you even have a credit card in your wallet. The following questions, often not asked or answered improperly are the key here.
First: what do I need this card for? Second: what am I eligible for?
The first is a good point because, in general - and we'll return to this point, you should think of credit cards as a basic tool which you can only use for one thing at a time.
Many people go out with a clear idea of what they need a credit card for and then get one that's unsuitable and use it anyway. Always keep in mind alternatives to credit.
For example, if you want to borrow but can't get a long-term purchases offer consider saving instead. If you want a credit card for extra security on purchases but think you might end up paying interest, try a debit protection scheme instead.
The second point is important because applying and being rejected from credit can have a negative impact on the way lenders perceive you. Do you homework and be realistic when you make an application.
If you're starting at the bottom you might be best off looking at bad credit rating credit cards and working your way up from that point.
Another common mistake is a misunderstanding of the way that payments to your credit card are applied.
All transactions are not equal. When it comes to 0% balance transfer credit cards, for example, payments are applied to the promotional rate first.
In other words, any other transactions you've made with the credit card will be left to accrue interest whilst you try to reduce interest by paying off your promotional balance at 0%.
Clearly this is not ideal so take a look at the allocation of payments clause and avoid spending during a 0% balance transfer.
Another common mistake is using a credit card to get out cash - this leads to higher interest, fees and no interest-free period. In short, avoid it.
