If you are only using your credit card as a means of purchasing, you are missing out on making the most of it. Used correctly, a credit card can not only save you money, but it can make money for you and you can use it to reduce your borrowing costs.
Check out our simple guide to see if you are making the most from your credit card.
1. Do you have a loan?
If so, a great way to cut the interest rates on that loan is to pay it off with a 0% balance transfer credit card. This means that you are saved from paying all the interest fees on your loan, and you have a certain amount of time to pay off your card.
For instance, it is estimated that the average household owes £3,218, with an average interest rate of 18% per year. If you moved that debt onto Barclaycard’s Platinum Credit Card with Extended Balance Transfer, you wouldn’t pay any interest for 26 months and you could clear your debt at a cost of just £113 (which is the balance transfer fee) and save over £1,000 in interest over the two years.
If you don’t need a whole 26 months to clear the debt, then look out for cards with a shorter 0% term and a lower handling fee. Barclaycard is tops again, with the Platinum 21 month card that offers 0% on balance transfers for 21 months with just a 1.45% fee. So transfer £3,218 and you’d pay just £47 on the debt.
2. Do you need a loan?
People who need a loan of under £5,000 should always consider getting a credit card with no interest on it, rather than a traditional bank loan. For example, the Fluid card allows you to transfer the amount of credit you have on the card straight into your bank account.
You’ll only have to pay for the 4% money transfer fee, but there will be no interest on that cash for 24 months, which equates to paying just £200 to borrow £5,000. Compare that to the best loan from Zopa at 7.5% over three years, and you’d have to pay back £375 in interest.
MBNA is offering the best credit card with money transfers, their Everyday card offers 0% on money transfers for 17 months with a 4% handling fee.
3. Get money back when you use your credit card
If you are one of those people who tend to use their credit card for everything, from food shopping to petrol, you should check out any cards that offer a cashback service.
One of the best on the market currently is from Barclaycard who are offering a massive 6% cashback on your five biggest purchases for the first three months. If you have some big ticket items that you are planning to spend money on, it is worth getting one of these cards.
The only drawback is the £24 annual fee on the card – but if you spend £400 a year you’ll make that back. After that initial period it pays 2% cashback on your five biggest purchases and 0.5% on all other spending.
4. Frequent flier? Get free air tickets
Air-miles cards were big in the 80’s, but seem to have dropped out of fashion for some reason. Now there are credit cards that are specifically set up to give you air points. The best by far is the Lloyds TSB Duo Avios card, offering 20,000 Avios points if you spend £500 on the card each month for the first three months.
You can get two return tickets to Europe for that. There’s also 0% on balance transfers for six months, and you’ll get 1,500 Avios points for every whole £1,000 you transfer. There is a £50 annual fee but you travel frequently and spend enough on the card it works out to be a great saving.
5. Pay less on holiday
If you like to travel more than once a year, you should consider getting a credit card that does not charge for spending abroad. There are a few out there, and it is the cheapest way to spend abroad, as all you’ll pay is a competitive exchange rate with no commission.
The Saga Platinum credit card do not charge for transactions and there’s no interest to pay on purchases or balance transfers for 9 months, but as the name implies, you have to be over 50 to qualify.
Under 50 years olds should try out the Halifax Clarity card, but make sure you pay off your bill in full when you get back from your hols, otherwise your gains for not paying exchange fees will be wiped out by credit card interest.