Credit card money-making tactics revealed

Card companies use as many as 12 different ways to make money from their customers, a new study reveals.

Research from Fool.co.uk exposes card companies' top ways of extracting extra revenue from their customers, which target both sensible card users as well as those taking maximum advantage of deals on the market.

"The tactics used include the magically appearing annual membership fees, charges for pseudo-cash products such as credit-card cheques, and hidden catches in balance-transfer deals," explained David Kuo, head of personal finance at Fool.

"The best way to combat these offensives is to read any material sent to you by your card provider to ensure that no changes to the terms are made without your knowledge."

He added: "Credit-card customers are regularly reminded by banks to take care against fraud. Ironically, the people that consumers need to be protected from most are people they are expected to trust – the card issuers themselves."

Fool.co.uk's top 12 credit card company money making tactics

1. The five pound card trick
"Instead of paying a minimum percentage of a balance each month, some credit cards now set the minimum monthly repayment at the monthly interest, plus premiums for payment protection insurance, plus fees, plus £5. The upshot is that your outstanding debt is whittled away at just £5 a month," Fool.co.uk warned.

2. Negative payment hierarchy hoax
"The least expensive debt is paid off first, meaning that the more expensive ones continue to accrue more debt interest for longer," the website advised.

3. Balance-transfer con
"Watch out for lenders that class balance-transfer fees as a purchase on 0% balance-transfer deals. This means the fee will not come under the 0% deal, but will instead be subject to interest at the purchase rate," explained Fool.co.uk.

4. Too-good-to-be-true typical APRs

"Only the most creditworthy applicants will ever get the lowest advertised interest rates. Although current rules state that two out of three borrowers must be offered the typical APR, this only applies to approved borrowers, not the number of people who apply," said Fool.co.uk

5. Congratulations! Your credit limit is upped
"A credit limit is not a debt target, though it is tempting to see it as such. Consequently, the greater your access to credit, the greater may be the temptation to spend."

6. The Insurance Maze
"Insurance comes in various guises, not just the high profile dodgy ones. Steer clear of rip-off Payment Protection Insurance (PPI) and Credit Card Repayment Protection (CCRP)," recommended Fool.co.uk

7. Late-payment sting
"Late payers not only face penalty fees but banks can also revoke any 0% deals you may have signed up to," Fool.co.uk warned.

8. Monthly interest-rates ruse
"Don't be fooled by monthly rates: a monthly rate of 1.5 per cent might not sound high, but it compounds up to a whopping 19.6 0% APR," the website noted.

9. Annual-fee Manoeuvre
"Credit card fees are making a comeback, with fees from £10 to £275," Fool.co.uk said.

10. Cash-withdrawals Wheeze
"A typical charge is 2.5 per cent of the withdrawal amount and a minimum charge of £2.50. So, if you withdraw a tenner, you'll be charged £2.50, which is equivalent to a 25 per cent charge. Withdrawals also attract interest at even higher than standard rates for purchases," explained the website.

11. Credit-card Cheques Trap
"Cheques sent to you by credit card companies attract interest at the standard rate for cash withdrawals, plus a handling fee of up to £50. Also, like cash withdrawals, you don't get an interest-free period," advised Fool.co.uk.

12. Gambling-fee Fleece
"Card firms are increasingly cracking down on punters who use their plastic to make online wagers. Previously, card issuers treated these transactions as purchases, but you're likely to find that they're now treated as cash withdrawals," the website warned.