Martin Lewis: My credit card masterclass... in full
PUBLISHED: 10:45 09 February 2018 | UPDATED: 10:45 09 February 2018
How to claim free flights, free Amazon vouchers and even free money - a credit card masterclass from MoneySavingExpert's Martin Lewis.
I never expected to have a catchphrase. Yet if I say to a crowd “pay off your cards…” they always shout back “…IN FULL”.
And knowing the IN FULL rule, well, in full is powerful, as it means if you play your (credit) cards right, they stop being debt cards, and instead turn into the perfect way to pay, with powerful perks at no cost.
If you repay your credit card in full in a month, then with almost every UK card you don’t pay any interest on your purchases (you do for cash withdrawals, so avoid those). Yet if you fail to repay even just 1p, and you pay interest on the whole amount (not just what’s left) for the month.
So set up a direct debit to repay in full each month and it will mean your credit card is effectively a debit card, as long as you don’t bust the credit limit.
Here are the top current credit card perks available – though if you don’t trust yourself to behave responsibly with credit, don’t do it, it’s not worth risking ruining your finances for.
1. Earn 5% cashback on all spending
Cashback credit cards pay you every time you spend on them. So use one for all normal spending, repaying in full, replacing cash, cheques and debit cards – and you earn.
Some make big bucks. To find which you’ll be accepted for use my eligibility calculator at www.mse.me/cashbackcards.
The top card is the no-fee www.americanexpress.com Everyday card. It pays accepted new cardholders 5% cashback to a maximum of £100, for three months then up to 1% after (you must spend at least £3,000 a year to get any cashback though).
The www.aquacard.co.uk Reward Mastercard is easier to be accepted for, accepted in more places, and also good for overseas spending, as it pays 0.5% cashback.
If you fail to repay in full, these are 22.9% and a horrid 34.9% rep APR, so be careful.
2. Free flights, lounge passes and Amazon vouchers
Spend £2,000+ in the first three months on the www.americanexpress.com Rewards Gold card to get freebies. It sounds a lot, but £700 a month isn’t that big for many families.
You get 20,000 bonus membership rewards points – redeemable for a £100 Amazon/Boots/M&S gift card or enough Avios points for a BA European return (you still pay taxes and charges). You also get two free worldwide airport lounge visits per year and ongoing points.
This card is a charge card, not a credit card, meaning you must pay in full. Do be aware, though, that after the first year there’s a £140 annual fee, so make a note to cancel that if you don’t want to pay it.
Near-perfect exchange rates in every country + £20 cashback
A few specialist credit cards give near-perfect exchange rates when you spend on them abroad.
So provided you pay off in full, it’s the no-hassle way to save big bucks on your big bucks (and euros, colons etc).
And right now one of the top cards, www.halifax.co.uk Clarity, gives newbies £20 if they spend in a foreign currency by Mar 31 (including online, eg, hotel bookings). Again, repay in full to avoid 18.9% rep APR. For more on this see www.mse.me/travelcreditcards.
Free Section 75 protection
If you pay on a credit card (not debit cards, not cash, not charge cards) for an item costing £100 to £30,000, it’ll normally be covered by Section 75 laws, meaning the card firm is jointly liable with the retailer if something goes wrong.
The obvious benefit is if you order something and the retailer goes bust, you can get your money back from the card firm.
But actually the joint liability means anything you can complain to a retailer about, you can choose instead to go to the card firm about.
In fact the card provider’s liable for the entire amount, even if you just pay 1p on the card.
Does applying for multiple cards hurt your credit score?
Every credit application leaves a mark on your credit report for a year: not a biggie unless you do lots in a short time.
Yet if you’re about to make an important credit application within the next few months (for example, for a mortgage), I’d hold off.
Many people though over time can gather five, six, or seven perks credit cards without a problem.
For full help on checking out your credit file, score and how to boost it, go to www.creditclub.com.
Martin Lewis is the founder and chairman of MoneySavingExpert.com.