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Credit cards are the best way to spend

Money Advice: Managing Credit Cards
By : Martin Lewis

Money-Saving Expert Martin Lewis gives more money advice

I love credit cards! You may be surprised, but without doubt, done right, credit cards are the best way to spend.

Unless there’s no choice, I leave my debit card, cheques and cash firmly in my pocket and bring out the plastic whenever I want to pay.

Of course, don’t get me wrong, plastic’s can be pernicious and has ruined many lives, but, used well, credit cards can make your life easier and cheaper.

People often confuse credit cards and debt. Yet a credit card’s simply a way to pay for goods, which has an optional borrowing facility. It’s this optional extra that’s the problem, not the card itself.

ALWAYS repay the card in full at the end of the month, preferably by direct debit, so there’s never any interest charged. Then you’ve converted your credit card into a normal bank card, but with lots of hidden extra benefits:

1. The cheapest way to spend abroad.

Spend abroad on the RIGHT credit cards, and it’s cheaper than even the best bureaux de change. Often you can be up to 6% better off using the right card.

The top card is Santander Zero which, unlike most cards, doesn’t add a hidden commission to the exchange rate and has no ATM withdrawal fee. Use it just for holiday spending and ALWAYS repay in full.

Nationwide, Saga and the Post Office cards are pretty decent for this too. Yet almost ALL others are hideous and charge too much. So it’s only the specialist cards that have this benefit.

2. Get free flights or spending vouchers.

Many cards dole out freebies as soon as you spend a set amount on them. To benefit, sign up then do your normal spending on the card until you hit the trigger, repaying in full, of course. Then wait for the freebie and don’t bother using the card again.

Freebies available can be vast. Typical deals include the BMI Amex card, where provided you do £250 of your normal spending on it within 90 days, you get enough BMI miles for a return business-class flight to Russia, Turkey, Majorca and more.

Others offer up to £30 of high street vouchers, free BA flights and more. For a complete list, see www.moneysavingexpert.com/ccfreebies

3. Free extended warranties.

Most electrical goods include a free year long warranty, so if the product breaks down, you can get it repaired at no cost. However they also try and sell you ‘extended warranties’ for extra years, at a vastly extended cost.

A few credit cards, such as Nationwide, give you an automatic extra year’s extended warranty on electrical goods provided you use them to pay. Of course, do ensure you pay them off IN FULL at the end of the month or you’ll be charged interest.

4. Get protection if the company you buy from goes bust.

Buy something costing over £100 on a credit (NOT debit) card, and, under Section 75 law, your credit card company is jointly liable with the retailer.

Then if the company goes kaput, you can’t contact it, or even just have product failure, you have exactly the same consumer compensation rights with the card company as you do with the retailer.

This applies even if you only pay part of the cost on the card. Buy a £3,000 TV and pay just 10p on your credit card and, they’ll hate us for telling you, but the card company’s liable for the whole £3,000.

5. Stooze for free cash.

For the super-savvy debt-free, you can make £100s for free from credit cards as they’ll lend you cash at 0%. Stick it in a top savings and you can earn 3% or more on it. There’s even a word for this: stoozing. It’s still possible to make serious cash doing this. See the full step-by-step guide at www.moneysavingexpert.com/stoozing

6. Free ID fraud protection.

All Capital One credit cards come with free ID fraud protection. Importantly, this doesn’t just apply to their own cards but everything you have – and you don’t actually need to use the card for it to work. So simply get a card, stick it in your pocket unused and you get two free credit checks each year and an ID fraud helpline if needed.

7. Use one to boost your credit score.

Those with poor credit histories can boost them by using a credit card to demonstrate responsibility. To do this, you need to apply for special ‘easy to get’ cards which normally come with hideous 30% plus interest rates.

Yet that’s not a problem as the aim is to spend a little on them each month and make sure they are repaid in full so it’s INTEREST FREE. After a year your credit history should be boosted. For a full list of best-buys, see www.moneysavingexpert.com/badcreditcards

8. Get paid to spend on ‘em.

Some credit cards pay you cash each time you spend on them. By doing all your normal spending on them, you can earn £100s a year.

Just ensure you’ve a direct debit to repay in full each month so it’s interest free. The current top-payer is Amex Platinum, which pays 5% cashback for three months, then up to 1.5%. You need family income over £30,000 for Amex Plat, yet there are many other cards too. See www.moneysavingexpert.com/cashbackcards for a full list of best-buys.

9. Purchase protection

Many credit cards offer a ‘purchase protection’ schemes, which mean buy something on the card and if it’s lost or stolen within a set time, usually around 90 days, you can get the money back from the credit card company.

For most people, it’s not worth a new card application to get one of these, as it’s pretty common, but do check whether your card has this benefit so you can take advantage if needed.

To bag every possible credit card benefit, you’d need to get enough plastic to do facial reconstruction on a Hollywood star, so it’s important to be careful and think about the impact on your credit score.

Every time you apply for credit it has an impact on your score and thus your ability to get a further new credit. That said, I’ve heard of people having up to ten cards with no problems. Though of course, if you’ve got debts, the absolute priority is to use your credit score to minimise their cost.

Spend £12 on DVD rental get £40 Tesco Rewards
New customers to Tesco DVD rental can get 1,000 clubcard points for signing up for three month. The points are worth £40ish in Tesco clubcard rewards such as magazine subscriptions and days out. Go to www.moneysavingexpert.com/tesco for a full guide.

25% off Friends & Family Railcards
The Family & Friends Railcard cuts a third off train tickets, provided a minimum one adult and one under-16 travel together. The maximum is two adults and two children. Cards normally cost £26, but until 31 March, you can get one for £19.50. Simply go to www.familyandfriends-railcard.co.uk and enter the code promo25.

Carvery 'n' pud £4.59
Crown Carveries are offering a carvery and a pudding for just £4.59, until 11 March when you take a voucher. The offer is available after 7pm Mon – Sat. Not available on Sundays. To print a voucher, go to www.moneysavingexpert.com/restaurantvouchers

Get Martin’s FREE tips and money-off vouchers emailed straight to you each week by signing up to www.moneysavingexpert.com/tips

TV money guru Martin Lewis runs the consumer revenge website MoneySavingExpert.com; ensure you get his weekly e-mail so you’re constantly saving money.

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