Many people worry about having credit cards: the effect they can have on your credit rating and the importance of making the monthly repayments can be scary. However, if you pay your credit card off in full every month (to ensure you’re never hit by high interest rates) you can take advantage of some incredible credit card offers and incentives. Use your credit card to your advantage and ensure that it doesn’t cost you a penny whilst still taking advantages of all of the rewards credit card companies offer to entice people to sign up. Just remember to pay off your balance in full every month! Here are five ways that you can use your credit card to your advantage:
A huge advantage of using your credit card to pay for any purchases, particularly any big purchases such as holidays or large white goods, is that you generally get more protection when you use your credit card than with any other payment method. Credit card companies are bound by a consumer law (commonly called section 75) that says that if you pay for something with a value of between £100 and £60,260 on your credit card then you will get your money back in full if anything goes wrong with your purchase. Money.co.uk explain that Section 75 of the Consumer Credit Act 1974 is a piece of legislation designed to “remove the risk that you, as a consumer, will ever get into debt paying for goods or services that you didn’t receive, were faulty or were otherwise not as described.” That means if your washing machine leaks or if your holiday company goes under then you can have the safety and confidence to know that your money is protected. And don’t worry if your card is used fraudulently: whilst this is, of course, massively inconvenient you are also protected from fraudulent use of your credit card and will get your money back from your credit card provider.
Take Advantage of Cash Back Programs
Don’t apply for or use a credit card that doesn’t come with any additional perks. Competition between credit card companies is fierce so many credit card companies offer fantastic incentives to entice people to make an application. If you already have a credit card then contact your provider to ask if they have a cash-back or other reward program you can join and take advantage of. If they don’t, consider switching your provider to one that does offer a cash back programme. An example of this is American Express, who are currently offering 5% cash back on all purchases for the first three months of your card ownership. Capital One are also offering 5% cash back on all purchases for the first three months, and then up to 2% cash back each month after that. As long as you pay your credit card bill in full every month (for at least that three month period) so that you don’t get charged any interest, you could actually make a profit from using your credit card!
Look For an Air Miles Credit Card
If you are a frequent flier for business purposes, or just love taking regular far flung holidays, then you should look for an air miles credit card. Much like a normal frequent flier programme, with an air miles credit card you will earn miles every time you spend on your credit card rather than every time you fly. Once you’ve collected enough miles you can turn your points in to flights and then, voila! You can enjoy a holiday at a dramatically reduced rate, and all because you switched your credit card. Be mindful of the golden rule though: this kind of credit card is only a good deal if you pay the balance on your card every single month. Otherwise the cost of the interest will negate the benefits you are receiving from your credit card’s reward scheme.
Build Up Your Credit History
It’s important to have a good credit history, as this is essential when it comes to applying for larger credit such as a car loan or a mortgage. However in order to show you have a good credit history you first have to have utilised your credit: and that’s where a credit card will come in. Even if you’ve never had a credit card before or prefer not to use credit cards for whatever reason, put a small amount on your credit card every month (use it to pay for your supermarket shopping or petrol, for example) and then set up a direct debit to pay off the amount in full. Using your credit card regularly will have a positive effect on your credit score, whilst paying back your full balance means you never have to pay for the privilege of using the card.
Credit Card Rewards Programmes
Finally, you could choose a credit card from the highly competitive rewards credit card market. If you are a regular shopper in Marks and Spencer, for example, a Marks and Spencer credit card could be the best option for you as it will offer rewards points for each pound you spend on the card, and then four times a year these points will be converted into shopping vouchers. Tesco offer a similar scheme where you earn Tesco club card points which are converted into vouchers to spend on your supermarket shopping (a great way to use your credit card and turn it into a tangible profit). If you do all of your monthly spending on your credit card rather than your debit card, paying it back in full at the end of the month of course, then these schemes could see you receiving a hefty return at the end of each period.
The main thing to remember is that if you use your credit responsibly, there are some incredible rewards to be had. However if you’re not good at managing your money, or remembering to make your payments on time, then these credit card offers are best left for someone else. You would pay more on the interest for a missed payment than you would gain from your credit card benefits.