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Day-to-day Usage

The following information on using your credit card will provide you with useful tips and points to consider so that you can make sure that you are managing your credit card in the best way possible.

Click on the link to view information about each of the following topics:

Having More Than One Credit Card in Your Wallet

If you transfer a balance to a new credit card or cards you can end up with several cards in your wallet. Think about how many cards you really need. If you believe you have more cards or more credit than you can resist or reasonably manage, talk to your credit card company and ask them to reduce your limit.

If you no longer want or need your old card, remember to cancel that card with your old credit card company and close the account.

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Additional Cardholders

Most credit card companies offer the ability to have an additional cardholder(s) on an account, say for a partner. However, remember that it is the main account holder who has signed the credit agreement with the credit card company, and who is therefore legally responsible for paying off the spending of all cardholders on the account.

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Spend Only What You Can Afford

It is common sense that you should only ever borrow what you can afford to repay, and borrowing on credit cards is no exception. Credit card debt can be more expensive than alternatives, such as a loan, if used for long-term borrowing. Anything you borrow and spend you will need to pay back, along with any interest accrued. DO NOT use your credit card as a means of buying goods and enjoying a lifestyle that is beyond your means. As with all your finances you should work out a budget and stick to it.

Important points to bear in mind before you use your credit cards:

  • For major purchases plan your budget carefully.
  • If you are finding your repayments difficult then don’t be tempted into making any new purchases that you can’t afford!
  • Compare prices and value when you are shopping for a particular item.
  • DO NOT think of the money available up to your credit limit as “free money” or money that you can freely spend. If you can’t afford to pay it back then don’t spend it. Ask yourself if you would still buy an item if you were paying cash for it.

If you want some help deciding if you can afford your current borrowing the Financial Services Authority (FSA), the UK's financial watchdog, has a handy online tool that can help you to find out whether you have - or are likely to have - problems.

Using the FSA debt test you will be asked a few simple questions about you and your finances. This will help you assess whether you need to reconsider your borrowing habits, provide you with tips on how to avoid debt problems and help you find advice on how you can tackle your debts if you believe you are in trouble.

The FSA's handy debt test can be found at http://www.moneymadeclear.fsa.gov.uk/debt_test

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Withdrawing Cash and Cash Advances

Credit cards can be used to withdraw cash at a cash machine, over a branch counter (though this usually requires the cardholder to present some kind of identification before receiving the cash), or at a Bureau de Change. There is usually a handling charge for each withdrawal, typically a percentage of the amount withdrawn. This is usually subject to a minimum fee. The details will be shown in the Summary Box.

For example, if you withdraw £100 from a cash machine, and your card has a cash advance fee of 2%, then you will be charged an additional £2.00 (or the minimum fee if this happens to be greater than £2.00), which will appear on your statement.

The interest rate for cash advances is often higher than the rate for purchases. Typically, you will be charged interest from the date that you withdrew the cash. You do not normally benefit from any interest-free period for cash advances.

Some card companies limit the total amount that you can borrow in cash to a specified amount or to a proportion of your credit limit. For example, if you have a credit limit of £1000, and the maximum you can borrow in cash is 90% of the credit limit, then you will not be able to have more than £900 in cash withdrawals outstanding at any one time.

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Balance Transfers

A balance transfer is when all or part of a balance owing on one credit card is transferred to another card (or cards), usually to save money. You should be aware that some credit card companies charge a one-off balance transfer fee, so the interest rate may not be the only cost to consider. Be sure to find out all the costs of a card before requesting a balance transfer and bear in mind the interest rate that will be applied once any introductory period has ended.

Many lenders offer low or 0% interest, for a time, on balance transfers. Generally, these offers will apply for a fixed period (e.g. six months) or until a given date (e.g. until 31 December) after which the rate will generally be increased to the standard rate for that card. If you tend to carry a balance on a credit card then this kind of offer may save you money.

Before applying for such an introductory offer, check the details in the Summary Box and make sure you understand all the Terms & Conditions, including:

  • what the introductory rate covers and how it will be applied to your balance (find out if the introductory rate is for transferred balances only, or if it also covers new purchases as well)
  • when the introductory period ends
  • what the interest rate will be after the introductory period ends
  • whether the introductory rate will end if you make a late payment or go over your credit limit
  • if any other fees or conditions apply. For instance, many credit card companies now charge a fee for making a balance transfer, usually a percentage of the amount transferred. For example, if the fee for making a balance transfer is 2% and you transfer £500, then you will be charged an additional £10, which will appear on your statement. You may find that you will need to pay off your balance in full if you want to avoid paying interest on new purchases.

The Banking Code requires that your credit card company gives you between four and eight weeks notice that you are approaching the end of an introductory offer period.

If you transfer a balance to a new card or cards think about whether you still need the old credit card. If not, cut the old card in two, return it to the credit card company and ask them to close the account.

Remember, these offers are usually for a limited time only. When the introductory period ends the interest rate will generally increase to the card's standard rate.

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Credit Card Cheques

Some credit card companies provide cheques that can be written against your credit card account. You write these like a normal cheque and you can use them as another way to draw on funds up to your existing credit limit.

Credit card cheques allow you to make payments to people or businesses that don’t normally accept credit card payments. Many credit card companies charge a fee for each cheque written, typically a percentage of the amount that the cheque is written for. This is often subject to a maximum amount.

For example, if you write a credit card cheque for £100 and the charge is 2% of the amount the cheque is written for, you will be charged £2.00. This amount will appear on your statement. Interest on credit card cheque payments is typically charged from the date the cheque is debited to your credit card account. Check the Summary Box for details, or check the information on any charges or conditions for using credit card cheques sent with them.

Note that credit card cheques:

  • Can only be made out for amounts within your credit limit.
  • In most cases, cannot be guaranteed, even if you write your sixteen-digit credit card number on the back. To find out if your credit card cheques can be guaranteed check the information sent with them or speak to your credit card company.
  • Do not give you the protection of Section 75 of the Consumer Credit Act, which you would have got if you made the purchase with a credit card.
  • Should always be destroyed if they are not required. Never just throw them away.

If you do not wish to receive credit card cheques contact your credit card company and ask them not to send you any.

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Transactions in Foreign Currencies

When using your credit card to make purchases or obtain cash in a foreign currency you will usually be charged a conversion or exchange fee. This may be included within the exchange rate or shown separately. Even so, credit card exchange rates (which are based on the current wholesale exchange rates) are generally better than the tourist rate. Check the Summary Box for details.

For example, if you spend €150 in France, this will be converted into sterling at the current exchange rate (say this is the equivalent of £100). If your card company’s exchange fee is 2% then you will also be charged an additional £2.00 that will either be reflected in the exchange rate used or appear on your statement along with the exchange rate used.

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Making Regular Payments with Your Credit Card

People are increasingly using credit cards to pay for goods and services where more than one payment is needed, such as for subscriptions to health clubs or monthly payments to an Internet service provider.

There are different ways you can organise regular payments, such as by direct debit or standing order, but when you authorise a retailer or organisation to claim regular payments from your credit card it is called a recurring transaction . There are important differences between recurring transactions and direct debits or standing orders. If you do use your credit card to make regular payments for goods and services it is important that you note the following:

  • the agreement for the recurring transaction is between you and the organisation from which you buy the goods or services, NOT between you and your credit card company
  • if you want to cancel the recurring transaction you must do this through the organisation from which you receive the goods or services - your credit card company CANNOT currently cancel the agreement or suspend payment on your behalf. However, the card schemes are working on ways that you may be able to cancel a recurring transaction through your credit card company, the final implementation date for which is planned to be April 2007
  • if you want to alter the amount that you pay you must contact the organisation that you have the agreement with and ask them to alter the amount being taken from your credit card account where it can be shown that you did not authorise a transaction or have advised a retailer to cancel a recurring transaction, but payments still continue, your credit card company should refund you.

Sometimes confusion occurs when cardholders close a credit card account or change their card without cancelling recurring transactions on that account with the organisations where they have agreements. If you close a credit card account this does not automatically cancel the recurring transactions on that account. On an account that is inactive or that has been closed, but where recurring transactions have not been cancelled with the organisation where you have an agreement, the organisation will continue to claim payment from that credit card account! Your credit card company is obliged to honour your agreement with the organisation with which you have made the agreement. To stop this from happening, when closing a credit card account or changing your card, you must contact any organisations that take recurring transactions from your credit card and either cancel the agreement or move the payments to another account.

If you would like more information about direct debits, standing orders and other types of automated payments please go to www.apacs.org.uk.

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Chip and PIN

The chip and PIN Programme is part of a worldwide initiative to reduce card fraud, and the UK is one of the first countries to put chip and PIN in place. It is a secure way for you to use your credit cards and debit cards and combines two effective security features - a microchip to help ensure that a card is not counterfeit and a PIN to help ensure that you are you. Instead of signing a paper receipt at the till to make a card payment you enter a four-digit Personal Identification Number (PIN), just like you do at a cash machine.

Not all people will have standard chip and PIN cards. For example, some people who are unable to use a PIN because of a disability will often have a chip and signature card. Any card that is not chip and PIN will still work with chip and PIN terminals. The retailer should process all types of cards in exactly the same way and follow the terminal prompts for instructions on how to proceed.

If you have a chip and PIN card and want to use it in a retailer that has not upgraded to chip and PIN technology your card will still work, but you will use a signature. Likewise, if you want to use your card abroad, in a country that doesn't use chip and PIN, your card will still work.

With the introduction of chip and PIN you will remain fully protected if you are an unfortunate victim of card fraud, provided you have not been negligent, as you are fully covered by the UK Banking Code. It is essential that you do not give your PIN to anyone and that you do not write down or record your PIN, or any other security information.

Go to www.chipandpin.co.uk for further information about chip and PIN, and tips for choosing and remembering your PIN.

Disability

For those people with a disability who may have difficulty with PIN there is the option to get a chip and signature card. For those people who do not have difficulty using PIN but who have impairments that may restrict them in other ways, the industry has worked to make the process of paying with a chip and PIN card easier.

All PIN pads follow international standards for terminal design. The vast majority will have tactile features, such as a raised dot on the 5 button. This layout enables disabled cardholders to use the PIN pad more easily.

In addition, there are two accepted formats for the 'function' keys - the 'cancel', 'clear' and 'enter' keys that will be located either vertically to the right of or horizontally below the numeric keys. Where coloured, the 'cancel' key is red, the 'clear' key is yellow and the 'enter' key is green.

Many retailers will have a separate PIN pad attached to the till via a wire, which allows a wheelchair user to pick up the PIN pad or remove it from its holder and use it comfortably and safely.

If you have a disability and think you may have difficulty with chip and PIN (because of your impairment) please talk to your credit card company who will discuss your options with you. These include continuing to use cards with signatures or other arrangements that these companies currently have in place.

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