Seven ways credit cards rip you off – and what to do about it (2023)

Used wisely, credit cards can help you borrow at little-to-no cost, while offering legal section 75 protection covering up to £30,000 should something go wrong with your purchase.

Some also come with rewards, like points, cashback and discounts, where you can earn money back on your spending.

But they also come with pitfalls, like extra fees and charges, which can make them extremely costly if you spend or borrow in the wrong way.

Telegraph Money finds out how credit cards rip you off – and how you can avoid getting caught out.

Charging you higher interest rates than advertised

Banks commonly advertise credit cards with annual percentage rates (APR) of 20pc to 30pc, but this rate is the “representative APR”. This rate only has to be offered to 51pc of successful applicants, according to Fairer Finance, a consumer group.

The other 49pc of applicants may get offered a much higher rate, which can be up to 60pc.

This is because the advertised representative APR is “subject to status”; some applicants may be deemed eligible for the credit card, but may be charged a higher rate of interest due to having a lower credit score.

James Dayley of Fairer Finance said it is worth bearing this in mind before you apply: “The rate you get is often not disclosed to you until you’ve made a full application, which leaves a hard footprint on your credit file.

“This means that if you don’t like the look of what you’ve been offered, your credit score will already be dented if you decide to reject the offer and apply for another card elsewhere.”

Also bear in mind that APR only includes compulsory charges – things like exceeding your credit limit or late repayments will come with additional fines.

Costs for failing to pay off your full balance

You can usually borrow money interest-free with a credit card if you pay off your balance in full by the payment date on your statement.

Any balance that’s left, however, will start to accrue interest, which can add up very quickly.

If you’re not planning on paying off your full balance, you’ll still be required to make a minimum repayment each month.

Make sure you know when this is due, as late payments can be noted on your credit record, and could have a negative impact on future credit applications.

If you’re worried about forgetting to make payments on time, consider setting up a direct debit.

Missed payment costs on 0pc deals

If you have a 0pc interest credit card, you won’t accrue interest on your balance, but you’ll still need to make minimum repayments each month. Missing a payment can have pretty dire consequences, as some lenders will withdraw the 0pc offer altogether.

If this happens, the whole balance will immediately revert to the regular interest rate, usually between 20pc to 60pc.

“New spending will start being charged interest at the standard rate – and most card providers won’t stop charging interest on those new purchases until you’ve cleared your entire balance in full – including the 0pc part,” said Mr Dayley.

If you’d been planning to use the credit card for a big ticket purchase and gradually pay it off, for example, losing a 0pc deal could mean you’ll either need to pay off the balance faster than you’d planned, or face a huge hike in interest.

Missed payments will also be recorded on your credit file, and can not only reduce your credit score, but will remain visible to potential lenders for six years afterwards, potentially hampering your ability to borrow in future.

Extra fees for cash withdrawals

Using a credit card for withdrawing cash is something you should try to only do in emergencies, as it can be a costly way to access cash.

Some lenders will charge a fee for ATM transactions, and you can also expect to pay interest on the amount from the moment the cash leaves the ATM.

Withdrawing cash using your credit card can also have an adverse effect on your credit score; according to credit reference agency Equifax, lenders may look on cash withdrawals unfavourably, as it could indicate you’re poor at managing your money.

If you need to withdraw cash, it’s usually far cheaper to opt for a debit card instead.

Charges for using your credit card abroad

Beware of hefty fees for using some credit cards when you’re abroad. If you take cash out, there are even bigger costs.

The main charges you need to watch out for are non-sterling transaction fees, which are usually charged as a percentage of up to 2.99pc of the cost of each transaction you make; non-sterling cash fees, which are typically around 3pc charged on ATM withdrawals; interest on cash withdrawals, which you’ll accrue as soon as a cash withdrawal has been made, and tend to be much higher than other rates of interest.

Some credit cards will hit you with all three charges for spending and withdrawing cash on holiday – so opting for a card specifically designed for travellers could prove much cheaper.

However, even if you find a card that offers fee-free ATM withdrawals abroad, you may still want to avoid making cash withdrawals, as even specialist credit cards will charge interest from the time the transaction is made.

What’s more, travel credit cards don’t tend to have the lowest APRs, so you should ideally pay off the balance in full each month.

As a final holiday spending tip, make sure you always opt to pay in the local currency, as you’ll get a more favourable exchange rate.

Perks that come with an annual fee

In addition to the APR interest and other fees, some credit cards also charge an annual fee, which just covers the cost of having the card regardless of how much you spend on it.

Usually, the fee can be justified by some kind of perk that you wouldn’t be able to get with a “free” credit card.

For instance, the American Express Platinum Cashback Credit Card has a £25 annual fee, but you can earn up to £125 in cashback over the first three months, and then 0.75pc cashback on spending up to £10,000, and 1.25pc cashback on spending over £10,000.

Its “free” equivalent, the American Express Platinum Cashback Everyday Credit Card, allows you to earn up to £100 in cashback during the first three months, then pays 0.5pc on spending up to £10,000, and 1pc if you spend more.

Regardless of what the perks are, you’ll need to weigh up whether you’ll use them enough to make the extra cost worth it.

Charges for transferring to another card

It can be a good move to transfer your debt to a credit card that’s specifically designed to help you pay it back, like a 0pc balance transfer credit card.

For a limited time, your balance will accrue very little interest – or no interest at all – making it easier to pay off the balance and save money on interest. Several providers offer a 0pc period of up to 30 months, but you’ll still need to make minimum repayments during this time.

However, transferring a balance from another card can involve a fee of up to 5pc of the balance – if you’re transferring a £10,000 balance, this means you’d get a transfer fee of up to £500.

You’ll need to weigh up the fee with the length of the 0pc balance transfer; if it gives you enough time to pay off the balance, it could be worth the fee. But if you have several balances you want to transfer, you might be better off using your cash to pay off each card rather than fund multiple transfers.


What are 5 things credit card companies don t want you to know? ›

7 Things Your Credit Card Company Doesn't Want You to Know
  • #1: You're the boss. ...
  • #2: You can lower your current interest rate. ...
  • #3: You can play hard to get before you apply for a new card. ...
  • #4: You don't actually get 45 days' notice when your bank decides to raise your interest rate. ...
  • #5: You can get a late fee removed.

What are 3 credit card mistakes to avoid? ›

10 common credit card mistakes you may be making and how to avoid them
  • Carrying a balance month-to-month. ...
  • Only making minimum payments. ...
  • Missing a payment. ...
  • Neglecting to review your billing statement. ...
  • Not knowing your APR and applicable fees. ...
  • Taking out a cash advance. ...
  • Not understanding introductory 0% APR offers.

What are 5 things you can do to avoid credit card debt? ›

Here are 12 tips to use a credit card but not end up in debt:
  • Save Up for Purchases. ...
  • Prepay Your Credit Card With Every Pay Cheque. ...
  • Use Your Credit Card for Only One Type of Expense. ...
  • Keep the Limit Low. ...
  • Be Accountable. ...
  • Put the Card Away If You Can't Pay It Off Each Month. ...
  • If You Can't Pay in Full, Pay Double the Minimum.

What are 5 ways to use a credit card responsibly? ›

6 Credit card tips for smart users
  1. Pay off your balance every month. ...
  2. Use the card for needs, not wants. ...
  3. Never skip a payment. ...
  4. Use the credit card as a budgeting tool. ...
  5. Use a rewards card. ...
  6. Stay under 30% of your total credit limit.

What are two things that you should never buy with a credit card? ›

Purchases you should avoid putting on your credit card
  • Mortgage or rent. ...
  • Household Bills/household Items. ...
  • Small indulgences or vacation. ...
  • Down payment, cash advances or balance transfers. ...
  • Medical bills. ...
  • Wedding. ...
  • Taxes. ...
  • Student Loans or tuition.

What are 5 things that most people look at when choosing a credit card? ›

Checklist of what to look out for when choosing a credit card
  • Annual Percentage Rate (APR). This is the cost of borrowing on the card, if you don't pay the whole balance off each month. ...
  • minimum repayment. ...
  • annual fee. ...
  • charges. ...
  • introductory interest rates. ...
  • loyalty points or rewards. ...
  • cash back.

What is the #1 rule of using credit cards? ›

The most important principle for using credit cards is to always pay your bill on time and in full. Following this simple rule can help you avoid interest charges, late fees and poor credit scores. By paying your bill in full, you'll avoid interest and build toward a high credit score.

What is the 15 and 3 credit card hack? ›

The Takeaway

The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.

What is the 91 3 rule credit card? ›

line of credit. so what this means. is that you are going to wait 91 days and. three full statement cycles before you decide. to ask either for a credit limit increase. or for a new line of credit all together. to maximize the amount of funding that you get.

What are the 10 hidden dangers of credit cards? ›

  • The Temptation to Overspend.
  • Interest Makes It Harder to Pay Off the Balance.
  • Risk of Getting Into Debt.
  • Risk of Ruining Your Credit Score.
  • Minimum Payments Create False Security.
  • Confusing Credit Card Terms.
  • It's Hard To Track Spending.
  • Credit Cards Come With a Risk of Fraud.
Jan 29, 2022

What is the 10 rule for credit cards? ›

To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.

What should I keep my credit card below? ›

Most experts recommend keeping your overall credit card utilization below 30%. Lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too heavily on it, so a low credit utilization rate may be correlated with higher credit scores.

What are the 9 rules for using a credit card? ›

Here are my nine rules for using credit cards wisely.
  • Set Up Autopay. ...
  • Always Pay the Full Statement Balance. ...
  • Make Sure Your Credit Balance is Less Than What's in Your Checking Account. ...
  • Keep a Buffer. ...
  • Never Buy Something On Credit You Couldn't Pay Cash For. ...
  • Don't Save Your Card Info to Your Online Accounts.
Aug 26, 2021

What are five ways to maintain good credit? ›

Establishing good credit habits is essential so that you can build and improve your credit history and credit score.
  • Pay your bills on time. ...
  • Avoid maxing out credit accounts. ...
  • Manage your debt-to-income ratio. ...
  • Contribute to an emergency fund. ...
  • Practice making payments before taking on new debt. ...
  • Monitor your credit reports.

What are the 3 best practices when utilizing a credit card? ›

Remember the key principles to using credit cards: spend only what you can afford, pay bills on time and pay off the balance every month.

What are 2 things that make credit cards worse than other forms of credit? ›

The cons of credit cards include the potential to overspend easily, which leads to expensive debt if you don't pay in full, as well as credit score damage if you miss payments.

What bills Cannot be paid with a credit card? ›

The short answer is, entertainment and nonessentials can usually be paid with a credit card with no fees. Services, utilities, and taxes, can often be paid with a credit card but with a processing fee. Loan payments, are usually check or bank withdrawal payments only.

How much should I spend if my credit limit is $1000? ›

A good guideline is the 30% rule: Use no more than 30% of your credit limit to keep your debt-to-credit ratio strong. Staying under 10% is even better. In a real-life budget, the 30% rule works like this: If you have a card with a $1,000 credit limit, it's best not to have more than a $300 balance at any time.

What are the three C's of credit cards? ›

Examining the C's of Credit

For example, when it comes to actually applying for credit, the “three C's” of credit – capital, capacity, and character – are crucial. 1 Specifically: Capital is savings and assets that can be used as collateral for loans.

What are the 4 C's of credit cards? ›

Note: This is one of five blogs breaking down the Four Cs and a P of credit worthiness – character, capital, capacity, collateral, and purpose.

What are the 3 C's that banks used before credit cards? ›

Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.

What is the credit card 7% rule? ›

Individuals with a classic FICO score above 795 use an average 7% of their available credit. As your revolving debt climbs, your credit score will begin dropping — long before it reaches the recommended utilization limit of 30% of your available credit.

What are 2 dangers to avoid when using a credit card? ›

  • Getting into credit card debt. If you have the wrong attitude about credit cards, it could be easy to borrow more than you can afford to pay back. ...
  • Missing your credit card payments. ...
  • Carrying a balance and incurring heavy interest charges. ...
  • Applying for too many new credit cards at once. ...
  • Using too much of your credit limit.
Jan 10, 2023

What is the 30 rule on credit cards? ›

According to the Consumer Financial Protection Bureau, experts recommend keeping your credit utilization below 30% of your available credit. So if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.

What is the secret code on a credit card? ›

The security code is a four-digit number that is listed on the surface of the credit card to the upper right corner of the card number. If you cannot find the security code or have further questions, please contact your credit card company.

What is the credit card trick on payment? ›

Make half a payment 15 days before your credit card due date. If your payment is due on the 15th of the month, pay it on the 1st. Pay the second half three days before the due date.

How to build credit with a $500 credit card? ›

5 steps to build credit with a credit card
  1. Pay on time, every time (35% of your FICO score) Paying on time is the most important factor in building good credit. ...
  2. Keep your utilization low (30% of your FICO score) ...
  3. Limit new credit applications (15% of your FICO score) ...
  4. Use your card regularly. ...
  5. Increase your credit limit.
Jun 29, 2022

What is the credit card 5 24 rule? ›

The Chase 5/24 rule is an unofficial policy that applies to Chase credit card applications. Simply put, if you've opened five or more new credit card accounts with any bank in the past 24 months, you will not likely be approved for a new Chase card.

When your credit limit is $3000 you should not spend over how much? ›

NerdWallet suggests using no more than 30% of your limits, and less is better. Charging too much on your cards, especially if you max them out, is associated with being a higher credit risk.

What is the perfect credit limit? ›

A good credit limit is above $30,000, as that is the average credit card limit, according to Experian. To get a credit limit this high, you typically need an excellent credit score, a high income and little to no existing debt.

How do credit cards trap you? ›

A debt trap is when you spend more than you earn and borrow against your credit to facilitate that spending. While this can certainly be caused by unnecessary spending, having inadequate savings to handle unforeseen costs can also result in a debt trap.

Who are the biggest credit card hackers? ›

Albert Gonzalez (born 1981) is an American computer hacker, computer criminal and police informer, who is accused of masterminding the combined credit card theft and subsequent reselling of more than 170 million card and ATM numbers from 2005 to 2007, the biggest such fraud in history.

How much of a $10,000 credit limit should I use? ›

Financial Responsibility

A good rule of thumb is to not utilize more than 30 to 40 percent of your credit limit at any given time. For example, if you have a $10,000 limit on your credit card, make sure to not have more than $3,000 to $4,000 worth of charges on the card at any given time.

What is the 2 3 4 credit card rule? ›

In terms of application restrictions, Bank of America has the 2/3/4 rule, which allows you to be approved for: 2 new cards in a 2-month period. 3 new cards in a 12-month period. 4 new cards in a 24-month period.

What does 5 24 mean? ›

What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.

How much of a $500 credit limit should I use? ›

Lenders generally prefer that you use less than 30 percent of your credit limit. It's always a good idea to keep your credit card balance as low as possible in relation to your credit limit.

What is the best way to stay out of credit card trouble? ›

How to Avoid 10 Habits of Credit Card Debt:
  • Read the fine print. Understand all the terms before opening a new credit card.
  • Stay on budget. ...
  • Check your accounts. ...
  • Don't miss payments. ...
  • Pay off the balance. ...
  • Know your credit usage. ...
  • Avoid cash advances. ...
  • Think before buying.

Is it bad to have a lot of credit cards with zero balance? ›

It is not bad to have a lot of credit cards with zero balance because positive information will appear on your credit reports each month since all of the accounts are current. Having credit cards with zero balance also results in a low credit utilization ratio, which is good for your credit score, too.

What is the 2 30 rule for credit cards? ›

2/30 Rule. The 2/30 rule says that you can only have two applications every 30 days or else you'll automatically be rejected.

What is the 20% rule for credit cards? ›

50% goes towards necessary expenses. 30% goes towards things you want. 20% goes towards savings or paying off debt.

What are the 5 C's of bad credit? ›

This review process is based on a review of five key factors that predict the probability of a borrower defaulting on his debt. Called the five Cs of credit, they include capacity, capital, conditions, character, and collateral.

What are the five C's of credit? ›

The five C's, or characteristics, of credit — character, capacity, capital, conditions and collateral — are a framework used by many traditional lenders to evaluate potential small-business borrowers.

What are 5 important things about credit? ›

Your credit score is based on five key factors

Here are the five factors, in order of importance: payment history, credit utilization, length of credit history, credit mix and new credit inquiries.

What are six helpful hints to follow if you have a credit card? ›

6 Credit card tips for smart users
  • Pay off your balance every month. ...
  • Use the card for needs, not wants. ...
  • Never skip a payment. ...
  • Use the credit card as a budgeting tool. ...
  • Use a rewards card. ...
  • Stay under 30% of your total credit limit.

What are four tips for using credit wisely? ›

Here are some tips that can help you use credit wisely:
  • Avoid charging to the limit. Some financial experts suggest staying within 35% of your credit limit.
  • Pay more than the minimum. If you can, pay your balance in full each month. ...
  • Avoid late fees. ...
  • Limit the number of cards. ...
  • Check your credit report. ...
  • Know your rights.

What are some red flags associated with credit cards? ›

Red Flags for Credit Cards: 7 Things to Watch for When You Have Bad Credit
  • Sky-High Interest Rates. ...
  • High Annual Fees. ...
  • Tacked-On Fees. ...
  • Incomplete Credit Reporting. ...
  • High Credit Limits. ...
  • A Lack of Monitoring. ...
  • No Room for Improvement.
Mar 30, 2020

What are red flags for credit card companies? ›

Common signs of credit card fraud
  • Large orders. ...
  • Same product, multiple skews. ...
  • Big-ticket items. ...
  • Large orders, multiple payment cards. ...
  • Same address, different cards. ...
  • One card, multiple shipping addresses. ...
  • Same IP address, different cards. ...
  • Multiple orders, similar card numbers.

What are 6 things a credit card companies must disclose? ›

Total of payments, Payment schedule, Prepayment/late payment penalties, If applicable to the transaction: (1) Total sales cost, (2) Demand feature, (3) Security interest, (4) Insurance, (5) Required deposit, and (6) Reference to contract.

What are at least 6 things your credit card company must clearly disclose to consumers under the Truth in Lending Act? ›

Sample disclosures required under TILA include:
  • Annual percentage rate.
  • Finance charges.
  • Payment schedule.
  • Total amount to be financed.
  • Total amount made in payments over the life of the loan.
Jul 26, 2022

What are three warning signs of credit card debt? ›

These warning signs can include: Difficulty paying bills on time. Receiving collection calls or past due notices. Living in your overdraft or line of credit.

What is flagging a credit card? ›

If you splurge on a spending spree or use your credit card for a large purchase, your credit card issuer may flag your account. Similar to travel, any card activity that's outside of your ordinary spending habits may trigger fraud protection and lead to your issuer freezing your account, causing a card decline.

What must a credit card company disclose? ›

A card issuer must disclose interest rates, grace periods and all fees, such as cash advances and annual fees. The issuer is also required to remind you of an upcoming annual fee prior to a card's renewal.

What are examples of red flags on a credit report? ›

Red Flag Alert examples include address discrepancies, Social Security number discrepancies, or information provided by the applicant is inconsistent with information on the consumer in the credit file.

What credit card information should not be shared? ›

Never share your credit card PINs, interest banking passwords, or mobile banking passwords with anyone, be it a friend or a family member. Even if you receive a message or email to share your credit card information, you should avoid sharing it. Do note that a bank or financial institution never asks for such details.

What is credit card discrimination? ›

What is credit and lending discrimination? Credit and lending discrimination occurs when a lender allows protected traits, such as race, color or sexual orientation, to influence its decision to offer you credit or a loan.

What is an example of money laundering on a credit card? ›

For example, criminals can initiate unauthorized domestic or international wire transfers by making cash advances on a stolen credit card—and place the funds into an account established to receive the transfers. Money launderers also use wire transfers in the second stage of the laundering process, the layering stage.

How would I know if someone is using my credit card? ›

How to spot it: Check your credit card or bank statement when you get it. Look for purchases or withdrawals you didn't make. Bonus advice: Sign up to get text or email alerts from your credit card or bank whenever there's a new transaction. This could help you spot unauthorized or fraudulent activity on your account.

What are the 5 Cs creditors look for? ›

Lenders also use these five Cs—character, capacity, capital, collateral, and conditions—to set your loan rates and loan terms.

What are 4 examples of information not found in a credit report? ›

Savings Accounts. Debit Cards. Prepaid Cards. Non-Delinquent Medical Bills.

What are at least four important pieces of information you can find in a credit card statement? ›

A summary of the transactions on your account—your payments, credits, purchases, balance transfers, cash advances, fees, interest charges, and amounts past due.


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