5 Common Credit Card Mistakes

Common Credit Card Mistakes - Expert with Points

When used effectively, credit cards help you efficiently manage your finances whilst allowing you to maximise the amount of interest you can earn from your current account.

The following are 5 common credit card mistakes to help you keep on top of your finances.

Common credit card mistakes:
1. Withdrawing cash from a credit card
Unless you have checked your card terms extremely carefully, you should avoid using your credit card at an ATM for cash withdrawals. Unlike purchases, most card companies will charge interest on cash withdrawals from the day of the withdrawal (rather than after the payment due date). As such, using your card for cash withdrawals can quickly become an expensive habit!

The main exception to this rule is selected specialist travel cards which allow you to withdraw cash abroad without incurring daily interest charges. If you are tempted to use your card at an ATM it is best to thoroughly read the terms and conditions of your card. If in doubt you can always phone the card company and ask.

2. Not clearing your balance in full
This one should be obvious, but not clearing your card balance in full can quickly become financially painful. Remember that your available balance is not “free” money! Keep a track of your spending and avoid spending more than you can actually afford to pay off.

The only real exception to this rule is if you have a 0% interest on purchases offer – whereby as long as you are making the minimum payment to your account each month, then you will not be charged interest on your purchases for a limited time.

3. Focus too much on rewards
With a number of reward cards (particularly the case with American Express) requiring you to meet a minimum spend amount to unlock various rewards. It is important to remember to always spend within your means.

4. Using the wrong card at the wrong place
This is particularly true for shop branded cards such as John Lewis, Tesco or M&S. These cards typically give you an excellent earning rate (often equivalent to 1% cashback) when you spend in their store, but the rate drops off when spending elsewhere.

Knowing the various earning rates of your cards can help you to ensure that you are maximising the rewards available to you at all times. It is also worth noting that using an intermediary card such as Curve will prevent you from earning targeted shop based rewards.

Currently the best all round card is the American Express Cashback Cards.

5. Closing your account
Contrary to popular believe, closing a credit card account can actually be detrimental to your credit score. When you close an account, you are removing a portion of your “available credit”. When calculating your credit score, utilised and available credit across all your cards are taken into account. Leaving a high proportion of your overall credit limit unutilised tells lenders that you are in control of your spending habits.

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Ross Slater

Ross Slater

Ross is Expert with Points' main contributor. Sharing his knowledge of various travel reward schemes, to help your travelling go further.

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