I have now either recorded or personally identified 43 different tricks that credit card companies use to make you either spend more money on your card, make you pay more interest or nab you with penalty fees and other costs.
And now another trick has emerged: if you make overpayments, some lenders will reduce your next direct debit payment by the amount of the overpayment, negating the benefit of overpaying.
Lenders that are alleged to carry out this trick include Barclaycard, Lloyds TSB, Halifax, Bank of Scotland, Santander and even the popular Nationwide Building Society.
When you overpay, you reduce the interest you pay on your debt. This can be considerable. Every £50 you overpay today might easily reduce the interest you pay over two years by £40.
Also, if you're overpaying in order to clear your debt before a cheap introductory deal expires, you may be confused if you don't check your credit card statements every month to ensure your regular payments haven't been reduced.
Plus, reducing your debt more quickly puts you in a safer position whenever you suffer one of life's inevitable emergencies or unforeseen costs.
How to use your cards safely
There are too many card tricks to explain each one individually here, especially as some are quite complicated. However, I'll try to condense the 43 tricks into a few simple general rules to help you avoid or deal with most of them, including all the worst ones. These are:
- Have an achievable budget designed to regularly overpay as much as you can afford.
- You must always pay the minimum every month – even if you have a 0% deal – to avoid penalty charges, the loss of 0% deals, and damage to your credit rating.
- If you just pay the minimum because you're on a 0% deal, ensure you save the difference in a savings account so that you can pay off the debt, or as much as you can afford, before the deal ends. Don't assume you'll be able to roll over the whole debt onto another cheap deal at the end of it.
- Don't use credit cards for gambling, or buying gift cards or gift vouchers, or for taking cash out at a cash machine.
- Don't buy foreign currency or postal orders with your card unless you've checked that it will be charged as a regular purchase, not as a "cash advance".
- Don't get stuck on standard interest rates (APRs). Always shop around for another deal and make a note in your calendar when introductory deals are approaching their end.
- Don't see your credit limit as a target and don't be tempted if you're "rewarded" with a larger credit limit.
- Don't pay a fee for a card, or choose a card, because it offers any insurance policies or other products that are added to it. Despite grand claims, these are usually of very little value – if they're worth anything at all.
- Don't be taken in by claims that you'll get access to "exclusive" foreign currency deals or other financial or travel products. You will almost certainly do far better by shopping around.
- Ensure you're not beguiled into buying a spontaneous holiday deal or other linked offer without taking a few days to think about whether you really want it and to compare your other options.
- With most credit cards, in most circumstances, you should not use them to make payments overseas (although you could get better protection from fraud if you're making large purchases). Read The best credit cards to use on your travels.
- Read the small print for inactivity penalties; to be sure you're not caught, use your card for some standard purchases (and get that better protection on top), but always pay off your card bill soon afterwards.
- Set up direct debits to pay off as much as you can and choose a date some time before the due date.
- Read every word in your card statements as soon as they arrive. Compare them to your previous statements.
- Always pay off your bill in full if you've gone for a reward or cashback card instead of a cheap introductory deal. If you can't do that, you have the wrong credit card.
- Consider cashback cards instead of reward cards, since they are usually far more rewarding and more versatile to boot. Don't ever buy something just because you receive cashback or a reward somewhere, and always shop around.
- If you feel a credit-card company is treating you unfairly, you can complain to the free Financial Ombudsman Service, who might force the company to compensate you. You lose nothing by trying. Read How to complain to the FOS