Credit card providers are great at catching customers unaware with little tricks and traps designed to help you pay them far more than you should be paying. Of course, if you’re not aware of what they’re doing, you might never even notice.

But it does pay to understand some of the more common tricks and traps that you could easily avoid if you’re vigilant. It also helps to remember a few simple tips that could really help to keep your interest costs down and save you money.

Here are some of the top credit card tips and tricks to watch for:

Low Minimum Payment

Far too many credit card customers fall into the trap of believing the amount showing on their statement as being the ‘payment due’ is all they need to pay each month. While this is certainly the minimum amount you’re required to pay by the due date, it’s barely going to be enough to cover the interest charges, plus a miniscule amount to pay off your balance.

This tactic is ideal for keeping customers in debt longer and paying more interest on the amount they owe. Credit card companies know that plenty of people won’t have the discipline to pay a little extra towards repaying the amount they spent, and so that credit card debt stays high for a longer period of time. Don’t be one of those people.

Cash Transaction Fees

It’s very easy to fall into the trap of believing that the little plastic card you carry around in your wallet is like easy money. You swipe your card and you get the things you want right now. So it’s only logical to assume you can do the same thing at an ATM and grab some easy cash when you need it, too.

Unfortunately, credit card providers don’t treat cash transactions the same way as they treat purchases. With most providers, any cash transaction will incur a higher interest charge on the money you spent on your card.

What’s more, that cash transaction interest rate is applied to that amount of money from the date of the transaction. This is bad news for those customers who thought they were benefiting from their card’s interest free days on purchases.

Payment Hierarchy

The vast majority of credit card providers apply a “payment hierarchy” to the money you spend on your credit card. Effectively, this means that any money you pay towards your credit card payment will be automatically applied to the balance amount attracting the lowest interest rate.

So, if you already had a really low balance transfer introductory rate in place and you paid for a purchase using your card, any money you repaid to your account would go towards your balance transfer amount – not the money you spent on the purchase.

Likewise, if you had a competitive purchase interest rate and you withdrew some cash from your credit card from an ATM, you would find that the cash transaction amount would continue being charged at a high interest rate until you’d paid off the amounts you’d spent previously on purchases first.

You can avoid this by making sure you only ever use your credit card for the purpose it was originally intended.

Interest Free Days

The interest free days on purchases offered by some credit cards can be great for some customers. As long as you can repay the entire amount you spent by the due date shown on your credit card statement, you won’t be charged any interest. Using this system correctly can mean never paying any interest on your credit card, which makes it a great financial tool for some.

Unfortunately, for other customers, this can be a bit of a trap. The difference between your statement due date and the beginning of your interest free days cycle will not always coincide with each other. Be sure you know the difference between them and understand how this will affect you.

You should also be aware that the interest free days are only valid on purchases made using your credit card, and not on cash advances or cash transactions.

Foreign Travel

If you pay for a purchase with your credit card while you’re travelling overseas, you could find that the fees are exorbitantly high. This is because your provider will need to pay an exchange fee to the payment processor to facilitate the payment in another country, plus other associated fees.

These fees will be passed onto you in the form of higher purchase interest rates, plus foreign transaction fees. You may also find that some providers will charge you interest on your overseas purchases from the date of the transaction. This can be a big trap if you thought you were taking advantage of interest free days.

Hidden Fees

Even though you might believe your annual credit card fee might be $100 (or whatever amount), did you know that some providers may often charge a Rewards Program fee on top of your annual card fee? Always take the time to check any fees that may be charged on your account and be sure you’re only charged the amount you expected to pay.

If you’ve applied for a balance transfer credit card, you may also find that some providers may charge a balance transfer fee based on the amount of money you intend to transfer across. Double-check how much your fees add up to and do some quick sums to be sure that switching to that account will be worth the cost you’ll pay in fees. If it isn’t, don’t make the switch until you can find an account that will save you money.

With so many tricks and traps to watch for with credit cards, it’s no wonder so many people view them as evil. Yet, when used properly and responsibly, credit cards can actually be a very powerful financial tool. The key to getting credit cards to work in your advantage rather than against you is to understand how they work and then use them according to your own budget and discipline levels.


This article was written by Timothy Ng. You can read more of his work at Credit Card Finder, such as his guide on using your credit card to pay your tax bill.