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Would you like to apply for a new credit card? You might not have thought about exactly what you want to pay for with the card, but it’s worth understanding how to spend on your card, so you don’t come up against any pitfalls.

You might be saying to yourself: “I know how to spend money on a credit card, I don’t need to listen to advice from a purple Guru, no matter how well-groomed he happens to be”. However, we’re talking about how to use a credit card wisely, so you don’t end up paying extra interest or fees on some items.

Read on to find out what you should be thinking about when spending on your credit card, and pitfalls you should avoid down the line.

How do credit cards work?

A credit card gives you the ability to make purchases on the card up to a certain limit, and then repay the balance on a monthly basis. Unless you have a 0% interest promotion you will have to pay interest on your remaining balance, which will be added to your total.

You will be expected to make a minimum repayment on your credit card every month, but it’s better to make overpayments so you pay the total balance off quicker. This will stop you being charged too much interest on top of what you owe.

You can also expect the following benefits when using a credit card, though some will only come with specific types of cards:

  • Credit score to improve – as long as you can make the minimum repayment every month, you will find that your credit score will slowly start to improve
  • Purchases to be protected – through Section 75 of the Consumer Credit Act any purchase you make between £100 and £30k will be protected, meaning if the company shuts down and you still need a refund, you can apply through your credit card provider
  • 0% interest – you can often get 0% interest with a balance transfer or a purchase card, meaning you won’t pay any interest for limited amount of time
  • Earn rewards – with rewards credit cards, you can also earn rewards such as supermarket loyalty points and air miles, depending on how much you spend on a monthly basis
  • Avoid transaction fees on holiday – if you have a travel credit card you can avoid foreign transaction fees and get the best exchange rates when spending in the local currency
  • Earn cashback – with a cashback credit card you can also earn cashback based on how much you spend

How should I use my credit card?

Now that you know how credit cards work you can plan to use your credit card responsibly to allow you to spread the cost of purchases and gain some of the advantages listed above.

Try to stick to the following rules when using your credit card:

  • Every time you are spending you are borrowing – the main thing to remember with a credit card is that whenever you use it you are spending money that isn’t yours. If you make a purchase, you need to know you can pay it off
  • Do not use it for everything, unless you can afford to repay – whilst a credit card is useful to spread the cost on selected purchases, you should try and avoid using it for absolutely everything, unless you plan to pay off the balance in the short term.
  • Check your balance frequently – whilst you’re free to spend what you wish on your card, keep checking your balance to make sure you aren’t overspending. If you are, time to cut back that month
  • If you’ve overspent, avoid using the card – if you know that you’ve overspent, take away the temptation to spend again by removing it from your wallet or purse and keeping it hidden at home
  • Do not withdraw cash – withdrawing cash on a credit card will incur additional fees, so always try and stick to spending on the card instead

What payments should I make with my credit card?

If you aren’t sure what you should be putting on a credit card and what you shouldn’t, we’re here to give you a little helping hand. The main reasons for putting things on the card should be to either protect the purchase or to spread the cost of an expensive item over a longer period.

  • High value items – whether it’s a washing machine, a new computer or even purchasing a smartphone outright, you can cover it with a credit card and pay it off gradually. Spreading the cost works best with a 0% purchase card, as long as you can repay the amount before the promotional period ends
  • Holidays – rather than pay it off all at once, spread the cost on a credit card. You will also have added protection in case you need to claim a refund, in the case of the holiday company going out of business or flights being cancelled
  • Contractors – when hiring a contractor, you can further protect your payment in case there are any issues with the job not being completed, by paying through a credit card
  • Food shopping – food shopping is an easy one to put on a credit card and will allow you to budget a little more every month. If you need to regularly spend to accumulate rewards, this is worth doing for other small expenses too

What should I avoid putting on my credit card?

The main expenses you need to avoid are ones that will accumulate additional fees on top of what you’re paying, or will lead to excessive payments down the line. Your purchases should be as controlled as possible so you can plan ahead and pay them off at your own pace, without racking up too much interest.

  • Rent payments – some landlords don’t accept a credit card for monthly rental payments, or will charge you additional fees to do so. Try to avoid any payments on your credit card that charge additional fees as you may have to pay more interest when paying it back. This could be disregarded if you would prefer your payment to be protected 
  • Gambling payments – many providers will now block gambling payments on a credit card, as you can easily rack up a large bill which you will need to repay with interest. Avoid gambling on a credit card as you can easily get into debt this way
  • Pay off other financial products – you should never use your credit card to pay off other credit cards or loans, as this will just increase your debt. Instead, think about getting a balance transfer credit card to consolidate your debt

Compare credit cards

Now that you know how to use a credit card, it’s time to find the right one for you! Use our free moneymatcher tool to find credit cards you are eligible to apply for, just by entering a few personal details.

Alternatively, if you’d like to start browsing credit cards, head over to our comparison tables using the link below.