Six costly credit card errors to avoid

Chris Torney / 06 July 2016

If you don't understand how your credit card works and haven't read the terms and conditions properly, you could make one of these costly mistakes.



Credit cards have a number of advantages, from allowing you to borrow money cheaply to giving rewards, such as cashback on the money you spend. 

But there are a number of potential pitfalls that cardholders face if they don’t check the terms and conditions or if they don’t understand exactly how their cards work. Here are the most dangerous ones to watch out for:

1. Paying your bill late

This is probably the biggest mistake you can make: if you pay off the whole of what you’ve spent as soon as possible, you generally won’t face any interest charges on your spending.

But even if you can’t pay off the full amount, you need to make at least a minimum repayment every month – this is usually a small percentage, say 2% or 3%, of the total debt. 

If you fail to pay this on time, you’ll face a penalty charge of around £10-£15 and possibly even more serious consequences.

For example, if you have a 0% introductory period, it is likely to be cancelled by your lender if you miss a payment even if it still has months to run.

Five mistakes that damage your credit report.

2. Applying for too many cards

If you are turned down for a card, the logical next step is to apply for another. But a string of failed applications looks bad on your credit record and can deter other lenders.

Before you apply, check your credit record to make sure it is clean and accurate – if there are any problems, put them right before applying if you can.

How do I check my credit report?

3. Being lured by long 0% deals

There is a real battle between lenders to offer long zero-interest deals in particular for balance transfers, some as long as three years. 

But look also at the cost of transferring your debt: some of the longest 0% deals come with the highest transfer fees, while a card with a shorter low-interest period might charge less.

Read our guide to using balance transfer credit cards to clear debt.

4. Making costly cash withdrawals

As a general rule, don’t use your credit card to withdraw cash – use your debit card instead. 

Cash withdrawals with a credit card usually come with exorbitant fees and the money taken out has interest charged on it from the off, rather than from the date of your next statement as with other spending.

Why do some companies charge a fee when you pay by credit card?

5. Not checking overseas charges

Your credit card can be a good way to spend while you’re abroad, but different cards have different charges. Check before you travel how much it costs to use your card and compare it with your debit card’s charges.

It can be well worth taking out a card with low overseas charges specifically for use on holiday.

Find out more about Saga's Platinum credit card.

6. Letting your debt linger

Despite the numerous 0% deals around, credit cards can be one of the most expensive forms of borrowing. If you can’t clear your debt by the time any 0% period runs out, you’ll face annual charges in the region of 20%.

A low-interest deal will give you some breathing space, certainly, but you need to be disciplined enough to pay off as much as you can before it ends.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.