Managing a credit card

Make payments in full each month

You’ll have a date you need to make your monthly payment by, which usually gives you the option to pay the minimum balance, the full balance or a nominated amount. If you don’t make the full payment, you will be charged interest, unless you have a 0% purchase card.

If you do have a 0% introductory offer, it’s still a good idea to get into the habit of paying off the full balance each month. This is because when the interest-free period comes to an end, you’ll be charged interest on the full balance you’ve racked up.

If you can’t afford the full balance, always make at least the minimum repayment. However, paying more will save you money in the longer term and mean you clear the debt quicker.

Pay on time

Paying late, or missing credit card payments all together, can be bad news for your pocket and your credit score. Your lender will charge a late payment fee of up to £12 and you’ll also have to pay interest. If you pay late or completely miss a monthly payment on a 0% credit card then the lender usually withdraws the interest-free offer altogether.

It also means bad news for your credit score. Late or missed payments are recorded on your credit report, so lenders may see you as an irresponsible borrower. As a result, you could find it more difficult to get credit in the future.

Set up a direct debit

Managing credit card payments via direct debit can help you avoid late payments. You can set it up online or over the phone to pay off the last statement balance. You can choose whether to pay the full, minimum or fixed amount automatically each month. If the minimum payment or statement balance due is more than the fixed amount, the minimum payment will be taken instead.

Know your limits

What happens when you max out your credit card? If you borrow over the credit limit on your card, you’ll usually be charged extra fees. You’ll also be unable to spend on it until you’re back within your credit limit.

Try to keep your balance on any card to 25% of the limit or less - the lower the better. Having too many cards with high limits can ring alarm bells for lenders, who’ll assume you’re dependent on credit. This could make it harder for you to be accepted for borrowing.

Compare 0% balance transfer cards

If you’re paying interest on a card, it makes sense to try to reduce the monthly fees. A 0% balance transfer card offers a 0% interest rate for a set period. If you’re accepted for one, you can switch credit cards and move your debts to the new one. Every payment you make will go towards paying off more of the debt, rather than interest fees, however do bear in mind that many lenders charge a one-off balance-transfer fee.

Pay off the most expensive cards first

If you’ve got multiple cards, a good tip to manage credit card debt is to check which has the highest APR or annual percentage rate, i.e. the amount of interest you’ll pay over the year. Start by paying this one off first, while making minimum payments, or as much as you can afford, on your other cards.

Pay more than the minimum

If you’re managing your credit card by making minimum repayments it will take you a lot longer, and cost you a lot more, to clear the debt. Try setting a monthly budget and working out what you have left to put towards paying off the balance.

Yes, you can withdraw cash from a credit card, however it can be expensive. You’ll face additional fees than when you use the card for purchases and you’ll even be charged if you have a 0% purchase card.

When you use your credit card to withdraw cash, you are charged a daily interest from the date you take it out until you pay off the balance. This is unlike normal credit card purchases, where you have an interest-free period until the statement is due at the end of the month.

Additionally, the interest is usually at a higher APR than on credit card purchases, plus you may also be charged a withdrawal fee.

When it comes to taking out cash abroad on your credit card, you’ll usually face a cash handling fee and foreign exchange fee on top – unless you’ve chosen a card that offers fee-free foreign transactions.

There are other instances where using a credit card could be considered as withdrawing cash, such as:

• Getting physical cash back on your shopping e.g. at the supermarket
• Buying foreign currency
• Paying utility bills
• Making a mortgage payment
• Buying gift vouchers
• Gambling (this includes buying lottery tickets and online betting)