Credit cards can be hugely useful when it comes to spreading the cost of large purchases; they can also help you to make big savings if you take advantage of the many cashback and rewards schemes on offer.
However, millions of credit card users get stung because they either have the wrong card for their needs or do not use it in the right way.
That's why MoneySupermarket has come up with 10 top tips to help you maximise the benefits of having a credit card and avoid any costly mistakes.
1. Pay more than the minimum
Paying just the minimum amount off your credit card balance each month will not only extend the time you are debt, it will also significantly increase the interest you pay over that time.
For example, if you spent £1,000 on a credit card which charged the average annual rate of interest of 18.1% and only repaid the minimum each month (2.5% of the outstanding balance or £5, whichever is greater), it would take you 16 years and 11 months to clear the debt and in that time you'd pay £1,113.44 in interest - more than doubling the cost of the original purchase.
You should therefore always try and pay as much as you can afford.
2. Try and pay your balance off in full each month
In fact, if you can, the best way to use a credit card is to clear your debts in full every month. That way, you can ignore the interest rate charged and take advantage of the cashback and reward cards on the market to cut your costs.
There are some fantastic deals out there for anyone who avoids charges by always paying off their balance within the interest-free period (see below).
3. Move to a 0% BT card if you have an outstanding debt
If you already have debts built up on a credit card or overdraft, then a card offering a 0% deal on balance transfers could well be the best way to tackle the situation.
The Barclaycard Platinum Credit Card with Extended Balance Transfer offers new customers the opportunity to pay 0% on balance transfers for an incredible 22 months, after which they pay a representative APR of 17.5% (variable).
The offer is subject to a balance transfer fee of 2.9% (as long as your transfer your outstanding balances within the first 60 days).
If your debts are less than £3,000, meanwhile, the Halifax Balance Transfer Credit Card also offers 22 months at 0% on balance transfers with a 3.5% fee and a representative APR of 17.9% (variable).
4. Don't apply for a card you have no chance of being accepted for
The best deals are reserved for customers with good credit scores, and failed credit card applications will have a detrimental impact on your credit score.
5. Use a credit card to improve your credit rating
Having too much credit can damage your credit score. However, having no credit history can be equally damaging. Fortunately, there are credit builder cards aimed at people looking to improve their credit ratings.
These include Barclaycard Initial with a representative APR of 29.9% (variable) and Capital One Classic at 34.9% (variable). Pay them off in full every month and you should soon qualify for better deals.
6. Don't miss a payment
Even if you cannot afford to clear your credit card balance in full every month, it is vital to make a payment of at least the minimum amount by the due date.
Otherwise, not only will you face penalty charges of at least £12, you will also compromise your credit score, making it more difficult to borrow in the future.
If you are taking advantage of a 0% offer on either balance transfer or purchases, missing a payment can also result in you losing the promotional rate.
7. Set up a direct debit
While you may have the best possible intentions to pay your credit card bill by the due date, we all make mistakes and it can be easy to slip up.
To avoid missing a payment and all the related disadvantages described above, it is therefore sensible to set up a direct debit to pay off at least the minimum amount each month.
8. Use a credit card to spread the cost of a large purchase
The best introductory deal on purchases available at the moment is from Marks & Spencer. Its credit card offers 15 months at 0%, as well as the chance to earn M&S points.
You will need to clear any balance built up during the 15-month interest-free period before interest charges come into play, however, or the representative APR of 15.9% (variable) will end up costing you dear.
Alternative options include the Tesco Clubcard Credit Card, which also offers 15 months at 0% on purchases, plus nine months at 0% on balance transfers (subject to a 2.9% fee).
It has a slightly higher representative APR of 16.9% (variable).
9. Get a cashback or reward card
If you pay off your bill in full every month, a cashback credit card can be a great way to get more for your money as a percentage of the amount you spend will be returned to you once a year, either as a cash payment or a reduction in your bill.
The best cashback cards on the market at the moment are the Santander 123 Cashback card and the American Express Platinum Cashback card.
Santander's 123 card offers 3% cashback on fuel purchases (up to a maximum spend of £300 a month), 2% on department store transactions and 1% on supermarket spending.
Watch out though: The representative APR is 22.8% (variable) and the card also has a £24 annual fee (this should soon be wiped out by the generous cashback offer though).
The American Express Platinum Cashback card also has an annual fee. It charges £25. You earn 5% cashback in the first three months (up to a maximum of £100) and 2.5% thereafter. The representative APR is 18.5%.
Another option is a reward credit card that gives you points or vouchers for every pound you spend.
The Tesco Clubcard Credit Card, for example, gives you one point for every £4 spent, in addition to the ordinary Clubcard points you accumulate.
10. Avoid overseas' fees
Most debit cards charge you a foreign loading fee of between 2.5% and 3.0% if you use them to make purchases while abroad, and while the majority of credit cards do too, there are some exceptions.
Cards that don't charge foreign usage fees include the Post Office Platinum Card, which offers a 3-month 0% period on purchases followed by a representative APR of 16.9%; the Sainsbury's Gold card, which charges an annual rate of 9.94% on purchases although there is a £5 monthly fee which takes the representative APR up to 20.1% (variable); and the Saga Platinum card, which has a nine-month 0% period on purchases followed by a representative APR of 11.9%. Saga products are only available to those aged 50 or over.
By Jess Bown, financial journalist for moneysupermarket.com
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
Moneysupermarket.com are a free, independent and compare all UK credit cards, as well as offering exclusive deals you can't get anywhere else.
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