Credit cards are big business in the UK.
The latest figures from the UK Cards Association show we spent £15.8 billion on them in a single month.
But not everyone uses them wisely – earning lenders a fortune in the process.
Find out if you’ve made any of these costly credit card mistakes.
Need to make a big purchase? Avoid interest with a new purchase credit card
Taking cash out
One of the worst things you can do with a credit card is take cash out on it.
Most lenders charge a sky-high fee each time and interest is applied from the moment you make a withdrawal.
So you’ll owe more than you took out even if you pay it all back straight away.
Official figures from the British Bankers’ Association (BBA) show that £3.93 billion worth of cash withdrawals were made on credit card in 2015 up from £3.86 billion the year before.
Since June the amount being withdrawn on credit cards has surged. In September credit card users took out a whopping £400 million compared to £347 million the year before.
On average people are taking out £125 on credit cards. With the average fee at £3 and interest applied at 26.83% you would have to pay back an extra £5.79 after one month.
Going on holiday with the wrong credit card
Credit card providers typically charge fees for the privilege of using your credit card while abroad or spending in another currency.
But there are a handful of credit cards that allow you to use them overseas fee free like the Post Office Platinum Credit Card and the Santander All in One Credit Card.
Take a look at the other top cards for your next holiday in our guide: The best credit cards to use on your travels.
Paying interest
Credit card companies want to make money, but if you’re being savvy you shouldn’t really be paying any interest to them.
There are plenty of 0% purchase credit cards on offer that allow you to spread the cost of big purchases and put off paying any interest for up to 28 months.
For those that have come to the end of a 0% purchase and still have a large balance to clear there are brilliant 0% balance transfer credit cards lasting up to 41 months that can help you avoid interest for longer.
Thinking it’s all about 0% deals
That said, credit cards aren’t just about 0% purchase periods and balance transfers: many offer rewards like points, air miles and cashback for your spending.
If you can definitely pay back what you owe each month you could benefit from these types of deals and earn rewards on your everyday spending.
The British Airways American Express, for example, offers a bonus 9,000 Avios when you spend £1,000 within your first three months.
You can then rack up one Avios for every £1 you spend thereafter.
Not using one for big purchases
Not using a credit card for purchases worth £100 or more can also be a costly mistake.
Credit cards offer an extra layer of protection when spending compared to debit cards.
Under Section 75 of the Consumer Credit Act credit card companies are jointly liable with retailers and suppliers for goods or services.
This means if something goes wrong, like a retailer going bust, you can claim your money back from the credit card company for goods worth between £100 and £30,000.
Thinking you can’t have one
The best credit card deals are usually reserved for those with the best credit scores.
However, there are a range of credit builder credit cards that can help you to start building or rebuilding your profile.
These deals don’t typically come with 0% introductory offers and charge high rates of interest, but if you use them for everyday spending and pay off your balance each month you can improve your credit score.
Using credit builder credit cards properly will help you gain recognition as a good borrower, which will open up access to better deals in the future.
Having too many
If you alrady have a good credit profile, credit card companies are more than happy to sign you up. But beware of taking out too many deals.
While not having any credit cards means you miss out on the best deals and pay more to borrow, having too many can mean you overspend and makes you look like a riskier borrower to other lenders like mortgage companies.
Lenders view credit cards as a potential debt, so if you have three credit cards with a £5,000 limit on each, even if they aren’t maxed out lenders see it as you being potentially in £15,000 in debt at any one time.
The other danger with having too many credit cards is that you are at a greater risk from fraud.