Frugal Fergal

I like to think I'm a very sensible credit card user. I treat my credit card as a charge card. I build up transactions over the month and then pay it all off in one go at the end of the month. I never over extend myself and accordingly, I never stumble upon any of these 12 ways your credit card company is ripping you off.

1. The £5 Repayment Trick

   Most credit card companies set the minimum default payment to the monthly interest plus £5. This makes the repayment charge appear attractively low and a lot of people fall for this. If your debt is so big you can't pay it off in full at the end of the month, come up with a more reasonable repayment schedule that you can afford and ensure it's considerably higher than the minimum repayment.

2. The Negative Payment Order Trick

   This is where the least expensive debt is paid off first with the more expensive ones continue to accrue more debt interest for longer. Most credit card companies do this, so either make sure you only use your credit card for one purpose (purchases or balance transfer) or find a card that does not perform this trick

3. The Balance Transfer Charge Trick

   In the good ol' days, a 0% balance transfer was exactly that. It didn't cost you anything to transfer the balance and neither did it cost you anything for the balance of the interest (assuming you weren't stung by the negative payment order trick above). Not anymore. Most credit card companies now charge between 2% and 3% for the privilege, but watch out: some of them treat this charge as a payment on your credit card so it doesn't qualify for the 0% interest rate applied to balance transfers.

4. The Insurance Trick

   Watch out for the payment protection insurance (PPI) and credit card repayment protection (CCRP) schemes that may be offered by default when applying for a credit card. Some online and paper applications require you to opt OUT of this "insurance" rather than opt IN. Always check your application form and cancel any PPI/CCRP schemes your currently enrolled in.

5. The Gambling Fee Trick

   Not only is gambling not likely to make you any money (the bank always wins) watch out when paying by credit card. Credit card companies are now starting to treat your Ladbrokes/BetFair/Tote flutters as cash withdrawals and they charge you accordingly. Oh and watch out, some treat MoneyGram and Western Union transactions in the same way too, so sending cash to a relative in a far away country may end up costing you more than the gift.

6. The Cheques in the Post Trick

   Sometimes your credit card company appears to be really considerate. Just when you think it's time to buy something on your credit card a nice pile of credit card cheques arrive in the post offering to make those payments and balance transfers much easier. Indeed they are, but watch out for the fees. You'll be charged as if you've made a cash transaction and then charged a handling fee for the cheque, and it can be a very expensive handling fee too. NEVER use these credit card cheques. You will regret it.

These aren't the only tricks your credit card company is likely to pull, but they're the easiest to lookout for and avoid without requiring a degree in mathematics or a calculator.