Don't be a credit card April Fool

You pay in sterling when shopping abroad

When you are abroad you may be asked if you want to pay in local currency or your home currency. The choice is yours, but the exchange rate offered for payment in sterling is almost always poorer than if you pay in local currency and let the card company do the exchange calculation when you get your bill. If you are told you must pay in local currency, this is not true. Visa and MasterCard rules say you must be given a choice. The retailer naturally wants to persuade you to pay in your home currency because he gets a cut of the exchange deal.

Going abroad? Find the best credit card for use overseas

You pay to insure your card

You can buy all sorts of insurance to protect your credit cards, including insurance against theft of the card and associated misuse, ID theft and insurance in case you cant pay your bill because of illness or even death - known as payment protection insurance (PPI).

You don't need theft insurance or ID theft insurance - the banking code protects you against misuse of your card and you should not suffer any financial loss as a consequence. PPI is very often a bad deal - it is expensive and riddled with exclusions. If you must have it, shop around, make sure the policy you are considering is appropriate for your needs and don't buy it from the card company unless it offers a competitive price.

Remember, if you die any debts such as credit card balances outstanding will be settled by your estate, if you leave any money or assets. If you die penniless your debts cannot be passed on to your family if your accounts were held independently, so don't feel that you need to buy insurance to protect them.

You are lured in by a 0% balance-transfer offer

These used to be a fantastic deal, but are less so now that you have to pay a fee of as much as 3% of the balance transferred. Watch out that you can repay the debt at the end of the term if you opt for one of these offers. The credit crunch means that banks are less willing to lend large sums these days, so moving the debt to another deal may not be the option it once was - and you could face a whopping interest rate charge if you havent taken other precautions to deal with the debt at the end of the current term.

You fall into the order-of-repayments trap

Most cards, with the exception of Nationwide, pay off the cheapest debt first. So if you have a 0% deal and continue to spend at, say, 15.9%, and you make limited repayments, your debt will continue to rack up because you will be paying off the sum borrowed at 0% first. If you are lucky enough to have a 0% deal, dont ever spend on that card until the debt is cleared.

Can you save money by switching to another credit card? Find out with Moneyextra's comparison service.

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Annie Shaw
25 April 2008 © Moneyextra.com

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