by Ben Salisbury
What are the benefits of using a credit card?
Using a credit card to buy something can have many different benefits. Firstly, you don’t have to pay for the purchase for between 30 and 59 days. This gives you an interest free purchase, as long as you pay your credit card bill in full every month.
If you use a zero per cent interest credit card it helps to spread paying for large bills or purchases.
Thirdly, you get certain legal rights when you use a credit card to make a purchase for anything that costs between £100 and £30,000. You don’t get these rights when you use a debit card.
These rights are provided under something known as section 75 and mean that if you don’t receive the service you have paid for on your credit card you should get a full refund from your credit card provider.
The final benefit of using a credit card, and what we are focusing on in this article, is that you can get rewards for spending money on your credit card.
What are the main types of rewards available and how do I decide which is the best?
The main types of rewards that you can receive with credit cards are cash back, free air miles and money-off at different selected retailers.
If you travel abroad regularly, then a card that rewards you with free air miles may suit you. If you have a large family and spend a lot in the supermarket each week, then one of the supermarket credit cards could appeal.
There are different types of credit cards available for all types of spending. Just remember, whichever one you use, make sure you pay it back in full so that you do not pay the credit card provider any extra money in interest.
What are the main pitfalls to avoid?
As mentioned above, the biggest pitfall to avoid is paying interest to your credit card company. You will avoid this if you pay off what you have spent each month. You can take advantage of some wonderful deals, get an interest-free period on your purchases and get rewards – all for nothing – as long as you pay the balance off each month. Otherwise the rewards you receive will be far outweighed by the extra interest you pay.
Apart from this, be savvy: check that what looks like a good deal really is a good deal. Many reward cards give you points to spend on expensive goods in department stores, or air miles towards overpriced flights. You would be better off buying the goods or services from a discount store or airline and just receiving a low rate of cashback reward from using your credit card.
The three best reward credit cards
The Halifax Rewards Clarity card is good for moderate spenders who spend £300 to £1,000 each month. You get £5 cashback each month when you spend £300, a good rate (1.7 per cent) for that level of spend, which goes down to 0.5 per cent for spending £1,000.
American Express Platinum cashback card offers 5 per cent cashback in the first three months up to £100. You get up to 1.25 per cent after that, with no limit on how much you spend, and there is no annual fee.
Natwest YourPoints World Mastercard allows you to earn one point for every pound you spend whenever you use your card. You can exchange your points through NatWest’s travel partners EasyJet and ebookers.com or earn vouchers for top brands like M&S, Amazon.co.uk and Boots. The big advantage here is that you are tied into retailers that are cheap anyway and your points can be used against products and deals that are already discounted, not just against high-price products from premium retailers.
The best rewards credit card for supermarkets
Sainsbury’s and Tesco both offer pretty good credit cards. The difference is that Sainsbury’s is part of the wider Nectar scheme, so you have more opportunity to pick up points and redeem at a wider selection of outlets. You get two points for every pound you spend in the first two years on the Sainsbury’s credit card.
The best for air miles
These cards are only really suitable if you only like flying with one airline. Otherwise it will work out better for your wallet if you book flights using a budget airline.
The best of the options is the British Airways American Express card. The free version gains you one mile for every pound you spend. You also get a bonus 1,000 miles for spending £500 within the first three months of having the card.
The best for cashback that you can spend anywhere
Capital One World Mastercard does not have an introductory cashback offer, but you can receive one per cent cashback on all purchases.
You also receive an extra £10 cashback every January. Cashback is not paid on balance transfers or cash advances. The best aspect of this card is that you receive bonus cash for spending anywhere.
The best for high street spending
If you shop a lot, check out the Express Rewards Credit card. It offers you up to three points for every pound spent at supermarkets, two points for every £1 spent at UK department stores, and one point per pound spent elsewhere. When you reach 5,000 points, you can exchange your points for a £25 gift voucher to use in high street shops like HMV and Amazon.
The best for books and films
Using Play.com’s rewards credit card gives you one point for every pound you spend generally, but two points for each pound spent at Play.com. You get 1,500 points if you make £150 worth of purchases anywhere within the first 90 days.
You get a return of two per cent on what you spend at Play.com, or one per cent for shopping elsewhere. You really need to do a lot of shopping at Play.com for this to be worthwhile. Amazon offers a similar card but the benefits are not quite as good.
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