Credit card benefits
Cashback credit cards - they do what they say and give you cash back on your spending
Cashback credit cards allow you to get money back based on how much you spend on the credit card, paid to your account monthly or yearly. It is usually between 0.5% and 1.5% of the amount you spend.
To choose the best credit card for you, you firstly need to work out how much you are going to spend on the credit card - some cashback credit cards are less generous for higher spenders, while other credit cards give you more cashback the more you spend. To find the best cashback credit card deal, look at the Which? guide to choosing a credit card and Which? cashback credit card reviews. To find the best credit card for any other needs, check the Which? Best Rate credit cards.
And be aware - some credit cards take away your right to cash back if you make late payments or exceed the credit limit on your cashback credit card.
| Cashback: Earn money back on Best Buy credit cards | |||
|---|---|---|---|
| Annual Spend | Smile Classic Visaa | American Express Platinum Cashback Mastercard First year cashbackb | American Express Platinum Cashback Mastercard Second year cashback |
| £3,500 | £17.50 | £56.88 | £17.50 |
| £6,000 | £30 | £110 | £42.50 |
| £8,500 | £42.50 | £163.13 | £67.50 |
| £11,000 | £55 | £221.25 | £97.50 |
| £13,500 | £67.50 | £286.88 | £135 |
| £20,000 | £100 | £450 | £232.50 |
Table notes
- Cashback is paid monthly, amount shown is total accrued over the year
- This includes the introductory offer of 5% cashback on all spend during the first three months
To make the most of cashback, put all your spending on the credit card and always pay the balance off in full each month so that you don't pay any interest.
Credit card reward schemes - earn points and bonuses on your credit card spending
Some credit cards give you points which you can then redeem against goods and services or convert into reward vouchers. However the range of goods and services you can exchange your credit card points for is normally limited.
To complicate things further, you also often need to spend between £500 and £1,000 before you can claim anything at all, and the number of points you earn may depend on where you use the credit card. It is therefore important to choose the best credit card that will reward you for how you'll use it.
It's also worth remembering that credit card companies change the range of rewards they offer. As a result you could find that when you finally come to exchange your points, the reward you wanted is no longer available from the credit card provider.
Overall, credit card points schemes are worth considering if you spend a lot of money at the host store, for example buying your groceries there. Many credit users who pay off their bill in full each month would, however, be better off with a cashback credit card.
Credit card protection - Section 75 cover could help you make claim to your credit card provider
When you use your credit card to buy something costing over £100 and up to £30,000, you get extra credit card protection under Section 75 of the Consumer Credit Act 1974.
Under this legislation, the credit card issuer is jointly liable with the retailer if you experience problems with the transaction -for example, if you order and pay for something with your credit card from a retailer that then goes bust before delivering your goods.
You also get the same protection when you use your credit card overseas or online.
Travel insurance offered by credit cards
Check you're getting enough cover
Free travel insurance is offered only by a handful of credit cards and usually only if you pay a hefty annual credit card fee.
If you rely on this 'free' insurance from your credit card, check it covers everything a comprehensive travel policy would. As a minimum, it should give adequate cover for losing baggage (unless you have suitable cover for possessions away from home through your home contents insurance), travel delays, medical expenses, personal liability and cancellation and curtailment of your holiday.
Have a look at our travel insurance guide to see the minimum cover we expect from a good travel insurance policy. Click here to find the best travel insurance deals.
Emergency credit cards or cash - help if you lose your credit card
Most credit card issuers will send a replacement credit card and cash if yours is lost or stolen while you're abroad. With some credit cards, you could have cash in your hand in just an hour, though with credit card providers it could take a few days.
Depending on your credit card provider, you could be limited to £1,000, or any amount up to your credit limit. This credit card perk may give you peace of mind, however remember you'll be charged interest on the cash and charges may apply as if you had taken it out of a cash machine using your credit card.
Credit card balance transfers - switch expensive debt from one credit card to another
Plenty of credit cards offer reduced rates for debt transferred over from another credit card. However, these special rates often apply only to the transferred balances, so any new purchases you make with the credit card will liable for a much higher rate.
Some credit cards will also give you reduced rates for new purchases. Introductory credit card rates normally last for six months but there are several credit cards offering 0% for nine months or more. Moving £1,000 from a card with a 14.9% rate to card with 0% could save you over £70 in credit card interest over six months.
Increasingly credit cards charge a fee for transferring balances from another credit card. This is up to 3% of the amount you transfer, usually without a maximum balance transfer fee.
There may be limits on the amount you can transfer so it's worth checking this out before you apply for the credit card. Also bear in mind that lots of credit cards expect you to transfer your balance by a set date after you take out the new credit card. Remember not to make purchases on the same credit card as these will normally be charged at a much higher rate.
And once your 0% balance transfer credit card deal finishes you'll also be charged at a higher rate, so either pay off your credit card balance before this happens or switch to another 0% balance transfer deal.
Flexible borrowing with a credit card
The main attraction of credit cards is that they allow you to borrow. Credit cards can be more flexible than loans – you can choose how much to spend within your credit limit, and how much to repay each month subject to a minimum, usually between 2% and 5% of the amount you owe. Of course, if you don't clear the balance, interest is charged. To find the best credit card for your needs, check the Which? best credit card deals.
Interest-free periods on credit cards
Most credit cards give you an interest-free period on purchases. These interest-free periods can be as long as 59 days.
You'll pay no interest on shopping you buy on your credit card during the month as long as you pay off the balance in full when you get your next statement. You'll also need to have repaid the previous month's bill in full to get this interest-free offer. If you don't pay off your credit card spending in full, most credit card providers will backdate the interest to around the day of purchase. If you plan to pay your credit card bill in full, it's worth setting up a direct debit for the full amount on your statement to ensure you never have to pay interest (or late payment fees).
This interest-free period is not to be confused with 0% deals on balance transfers and 0% deals on purchases offered by many credit cards.
To find the best credit card for your needs, check out the Which? best deal credit cards.
The downside: credit card fees and penalties
Credit card companies also make money by charging you when you make a late payment or exceed your credit limit. However the decision by the Office of Fair Trading in April 2006 to cap credit card penalty charges at £12 has forced companies to radically alter the way they do business. For more detail, see the Which? guide to reclaiming credit card fees.
As a result, balance transfer fees have risen and 0% credit card deals have in some instances been replaced by cashback offers, reward credit cards and points schemes – all designed to encourage us to spend on our credit cards.