MSE has urged people to pay off their credit card in full every month, otherwise you pay interest on the entire balance
Martin Lewis’ MoneySavingExpert.com team has issued a warning to anyone with a credit card.
MSE has urged people to pay off their credit card in full every month, otherwise you pay interest on the entire balance – even if you only have 1p left on your card.
In the latest MSE email, the team wrote: “There’s a reason it’s Martin’s catchphrase. With £1,000 spending debt on a credit card, if you clear the whole lot in a month, there’s no interest.
“Yet pay off £999.99, and you’ll usually pay interest on the whole £1,000, not just the 1p left.”
It comes as MSE flagged a way to make money back when you spend on your credit card – but again, the golden rule from Martin Lewis is to always pay off your balance in full every month.
The latest newsletter discusses the Lloyds Ultra Visa credit card, which allows you to earn 1% cashback on spending for a year, with no cap. If you don’t pay your balance off in full, you’ll be charged 12.9% representative APR interest.
After a year, Lloyds’ cashback falls to 0.25%. Another alternative is the Amex Cashback Everyday which offers 5% cashback for five months, maxed at £125 – but only if you spend £3,000 or more a year on it.
After the five months, cashback drops to 0.5% cashback on up to £10,000 a year, and 1% above. The interest rate on this card is 29.7% APR representative. Virgin credit card offers 1% cashback, but only for three months.
MSE also explained how credit cards also have “hugely powerful” Section 75 protection. MSE said: “This means buy something costing £100 to £30,000 and pay for any of it (even 1p) on the card and the card company is jointly liable with the retailer for the entire amount if anything goes wrong.”
You also always use a free eligibility calculator to see which credit cards you are likely to be accepted for before you apply, as too many applications on your credit file could make you look like a risky borrower.
Cut your credit card debt
If you’re struggling with credit card interest, MSE says it is worth considering a 0% balance transfer card. This is where you move your existing credit card balance to a new card where there is a 0% interest period for a set period of time.
You need to make sure you can pay off the whole balance before your 0% interest period finishes or you’ll start paying the representative APR.
You also need to always make your minimum repayments, otherwise you risk losing the 0% interest perk, and check if there are any fees involved when transferring your debt.
Finally, you should avoid spending or withdrawing cash on these cards as you’ll often lose the 0% period – and the fees can be expensive.