I never expected to have a catchphrase. Yet if I say to a crowd “pay off your cards…” they always shout back “ …IN FULL”. And knowing the “in full” rule, well, er, in full is powerful. As it means if you play your (credit) cards right, they stop being debt cards, and instead turn into the perfect way to pay, with powerful perks at no cost.
Repay your credit card in full in a month, then with almost every UK card you don’t pay any interest on your purchases (you do for cash withdrawals, so avoid those). Yet fail to repay even just 1p, and you pay interest on the WHOLE amount (not just what’s left) for the month.
So set up a direct debit to repay in full each month and your credit card is effectively a debit card, as long as you don’t bust the credit limit.
Things have just improved for credit card users. Last month new rules stopped retailers levying extra fees for those paying with personal credit cards. While a few still naughtily haven’t changed, most charges are now consigned to history. Some firms have frustratingly replaced them with a charge for all, but even then it means there’s no longer a premium to pay via credit card.
So here are the top current credit card perks available - though if you don’t trust yourself to behave responsibly with credit, don’t do it, it’s not worth risking ruining your finances for.
1. Earn 5 per cent cashback on all spending
Cashback credit cards pay you every time you spend on them. So use one for all normal spending, repaying in full replacing cash, cheques and debit cards - and you earn. Some make big bucks, including Christine who tweeted me: “@MartinSLewis £200-£300 per year cashback for the last 15 years or so with Amex #happybunny.” To find which you’ll be accepted for use my eligibility calculator at www.mse.me/cashbackcards.
The top card is the no-fee www.americanexpress.com Everyday card. It pays accepted new cardholders 5 per cent cashback to a max £100, for three months then up to 1 per cent after (you must spend at least £3,000 a year to get any cashback though). The www.aquacard.co.uk Reward Mastercard is easier to be accepted for, accepted in more places, and also good for overseas spending, it pays 0.5 per cent cashback.
Fail to repay in full and these are 22.9 per cent and a horrid 34.9 per cent rep APR, so be careful.
2. Free £100 Amazon voucher or British Airways Europe return flight plus two airport lounge passes
Spend £2,000+ in the first three months on the www.americanexpress.com Rewards Gold card to get freebies. It sounds a lot, but £700/mth isn’t that big for many families.
You get 20,000 bonus Membership Rewards pts – redeemable for a £100 Amazon/Boots/M&S gift card or enough Avios points for a BA European return (you still pay taxes and charges). You also get two free worldwide airport lounge visits per year and ongoing points.
This card is a charge card, not a credit card, meaning you MUST pay in full. Do be aware though after the first year there’s a £140 annual fee, so diarise to cancel that if you don’t want to pay it.
3. New York City business-class return (big spenders only)
Some credit cards give you frequent flyer miles when you spend on them. For bigger spenders, who like to fly at the front of the plane, and collect over a few years they can be far more lucrative than cashback cards, for example allowing business class flights for two to Miami for just the £500 or so taxes and charges per person.
The no-fee BA www.americanexpress.com gives one Avios point per £1 spent, plus 5,000 extra when you spend £1,000-plus within the first three months. For big spenders, put £20,000-plus on it (great if you pay then reclaim expenses on it) and you get a “free” companion ticket, meaning whatever ticket you redeem in points, even first-class, you get a second “free” – though you still pay taxes for both.
Do repay in full each month to avoid the 22.9 per cent rep APR. For more flight card options see www.mse.me/airlinecards.
The big problem with Avios and other rewards is getting a flight on the date you want, so it’s best for those with flexibility to travel when flights are available.
4. Near-perfect exchange rates in every country plus £20 cashback
A few specialist credit cards give near-perfect exchange rates when you spend on them abroad. So provided you pay off, yep, in full, it’s the no-hassle way to save big bucks on your big bucks (and euros, colons etc).
And right now one of the top cards, www.halifax.co.uk Clarity gives newbies £20 if they spend in a foreign currency by 31 Mar (including online, eg, hotel bookings). Again, repay in full to avoid 18.9per cent rep APR. For more on this see www.mse.me/travelcreditcards.
5. Free Section 75 protection
Pay on any credit card (not debit cards, not cash, not charge cards) for an item costing £100 to £30,000 and it’s normally covered by Section 75 laws, meaning the card firm’s JOINTLY liable with the retailer if something goes wrong
The obvious benefit is order something and if the retailer goes bust, you can get your money back from the card firm. But actually the joint liability means anything you can complain to a retailer about, you can choose instead to go to the card firm about.
For example, if you bought a posh handbag in New York, and discover a fault, you can ask the card firm to sort it rather than “going back” to the shop. In fact, the card provider’s liable for the entire amount, even if you just pay 1p on the card.
Does applying for multiple cards hurt your credit score?
Every credit application leaves a mark on your credit report for a year. Not a biggie unless you do lots in a short time. Yet if you’re about to make an important credit application within the next few months (such as for a mortgage), I’d hold off. Many people though over time can gather five, six, or seven perks credit cards without a problem. For full help on checking out your credit file, score and how to boost it, go to www.creditclub.com.
Martin Lewis is the founder and chair of MoneySavingExpert.com. To join the 12 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/ latesttip.