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Credit Cards Tricks

This is where we tell you how to beat your credit card company at its own game! There are tricks that some may try and play on you and now it's time to get your own back.

• Always Try to Pay Your Bill in Full

This is a pretty simple one, but if you do it, you will not need to worry about many of the other card playing tricks. This means that you can concentrate on other card benefits such as cashback and loyalty points.

• Allocation of Payment

Allocation of Payment (also known as the Payment Hierarchy) is where your credit card company tries to get maximum return from different interest rates, especially where an offer of a discounted rates has been made. Almost all credit card companies allocates your payments to the lowest bearing interest rates first.

So if you have just taken out a new credit card that has offered you a 0% balance transfer deal, your payments will be offset against your balance transfer amount before your new purchases. This means that you may find yourself paying interest on your purchases!

• A typical allocation example would be:-
• Interest on special offers
• Other interest, any fee and charges
• Special offers
• Purchases
• Cash Advances and money transfers

If you do need to transfer a balance to a zero or low rate deal, try to only use this card for the balance transfers and not new purchases if you can.

• Balance Transfer Fees

Don't forget that almost every credit card company now levies a balance transfer fee, typically between 1.75% and 3.00%. This may make your 0% balance transfer deal look less attractive than you first thought.

• Credit Card Cheques

Remember those credit card cheques they very kindly send to you from time to time? Most card issuers will charge a processing fee for these cheques, which typically ranges from 2% to 3% and may have a minimum charge, often £25. Check any offer they make when they send the cheques to see if there is a discounted rate, how long it is available for and what the processing fees are. You may find that the interest rate is actually higher than the retail sales rate.

• Stoozing

Are you a Stoozer? Any credit card that offers 0% interest (or sometimes a discounted rate) on balance transfers or new purchases gives you the chance to be a Stoozer.

Stoozing is all about making money from your credit card and is often done with balance transfer credit cards, although it should be remembered that all balance transfer credit cards now charge a balance transfer fee; usually ranging between 1.7% (see Capital One Platinum MasterCard Credit Card) and 3%.

A very simple example can be seen with a card that offers 0% interest on new purchases. If you use the card for all of your new purchases (just paying off the minimum amount each month), you can put the equivalent amount to what you spend on the card in to a high-interest savings account, then at the end of the interest free period, you clear the balance of the card. You have then Stoozed the interest that you have made in the high interest savings account.

Of course, Stoozing requires discipline. You must ensure you make the minimum payments and do have the money to clear the balance at the end of the interest free period.

• Rate Tarts

What's a Rate Tart? A Rate Tart is someone who shifts balances around from one 0% deal to the next. This can be a great way to have a longer-term debt at a zero or low interest rate. Don't forget that this takes careful management and remember that you're never guaranteed to get a new 0% deal that has a credit limit sufficient to take any outstanding debts that you may want to transfer. Also, don't forget that almost every credit card will levy a balance transfer fee.

• Section 75

If you pay for something that costs more than £100 with your credit card, it will be covered under Section 75 of the Consumer Credit Act. This means, if there's anything wrong with it, the credit card company is liable to the same extent as the supplier. That's assuming the supplier has breached its contract with the buyer or misrepresented the goods or service.

• Foreign Exchange Fees

Not so much a trick but easy to forget. Almost every credit card company will levy a foreign exchange fee every time you use your credit card abroad. Typically, this is around 2.75%. The Post Office Credit Card is the only card that we know of, that does not charge a Foreign Exchange Fee.

• Default Charges

Don't let your credit card company overcharge you for late payments etc. Their charges should relate to the cost involved. Recent press has meant that many credit card issuers have reduced these fees.

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