Credit cards aren’t just a convenient method of borrowing, they can also come with a number of other benefits.
Here we outline some of the ways you can make the most of your card, whether you’re looking to earn cashback, build your credit rating or make cheaper overseas transactions.
1. Earn interest
If you’re well organised and don’t have any credit card debt, you can take the following steps to make money – a process known as ‘stoozing.’
Apply for a card that offers 0% on purchases; the longest deals offer up to 18 months interest-free. Then use this card for any regular spending you would have done on your debit card, but make sure you keep within your credit limit. Meanwhile, open a best rate easy access savings account and pay in the amount you would have paid on your credit card each month.
However, remember to pay the minimum amount on your credit card each month as otherwise you’ll lose the 0% deal and end up paying interest, defeating the whole object of the exercise. It’s a good idea to set up a direct debit to avoid this happening. Before the 0% deal on your credit card expires, take the money out of your savings account and repay the remaining credit card balance.
Which? Comparison Table – Best credit cards for 0% on purchases – compare the best deals on the market
2. Get cash back
Cash back credit cards allow you to earn while you spend – this money is credited to your card or taken off your bill. Remember that cash back and reward cards are only worth considering if you pay off your credit card bill in full each month, because otherwise the interest will soon outweigh anything you earn.
The standard rate offered typically ranges from 0.25% to 2% of the amount you spend. Some of the best deals on the market also offer a higher introductory rate of up to 5%, although the amount of cash back you can earn is capped over this period.
Which? Comparison Table – Best credit cards for cash back – compare the best deals on the market
3. Reap the rewards
Reward credit cards differ from cash back credit cards by giving you points which you can redeem against goods and services or convert into reward vouchers with a particular retailer.
The key to picking the right reward card lies in where you do your shopping, and what rewards will save you most when you cash in your gains. Make sure you check the vouchers for expiry dates as some have to be used within a certain time period. Some providers automatically send vouchers once you hit a certain points threshold.
Which? Comparison Table – Best reward credit cards – compare the best deals on the market
4. Boost your credit score
Lenders look for evidence that you’ll be able to pay back what you borrow, so having little or no credit history can be just as damaging to future credit applications score as having a poor history.
Some credit cards are specifically designed to build your credit rating. They are likely to have lower credit limits, higher interest rates and fewer benefits for cardholders than a traditional credit card. But if used sensibly, they can improve your chances of being accepted for better credit deals in the future.
Which? Comparison Table – Best credit cards for building my credit rating – compare the best deals on the market
5. Cheaper spending abroad
If you pick the right card, spending abroad on your credit card could work out significantly cheaper than other options, including debit or prepaid cards.
Most credit and debit cards on the market charge a foreign loading fee for transactions made outside the UK, but there are a handful of credit cards that waive this fee, which typically ranges from 2.75% – 2.99%.
The Halifax Clarity card offers one of the best deals at present as it doesn’t charge the foreign loading fee and has a reasonable 12.9% APR on purchases and cash withdrawals.
Which? Comparison Table – Best credit cards to use abroad – compare the best deals on the market