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Credit cards with benefits

Would you say ‘No’, if a complete stranger handed you £200 a year with no strings attached? How about £100? £50?

That’s why I use credit cards. The right ones insist on giving me free money for the privilege of sitting in my wallet and funding purchases that I’m going to make anyway.

By smartly slaloming through the system, you can pick up special offers and free coins like Super Mario gobbling power-ups, and so earn a bit extra every year.

As long as you can follow the credit card house rules (see below) you merely need to choose the right tool for the job.

Turn your credit card into a smart card

A credit card for every occasion

Whatever kind of credit card you’re after, it’s out there. Of course, we don’t want the loan advancing, wage-slavery inducing variety.

Here is a quick guide to the savvier weapons of choice:

Cashback cards
A small percentage of your spending is returned to you every year in cash. You should accept no less than 0.5% cashback and can earn up to 5% with a bit of extra effort. A 1% cashback rate would earn you £100, if you spend £10,000 that year.

Reward scheme cards
The same deal as cashback credit cards, but your pounds equal points and points mean prizes. Prizes like free flights, shopping vouchers and so on. Compare reward schemes versus cashback cards to see which is more worthwhile.

0% spending cards
Credit cards can fund a cheeky little saving scheme known as stoozing. You spend as usual but on a card that offers 0% interest on new purchases. Make the minimum repayments on the card every month and save your accumulating cash in the best instant access savings account. Just before the 0% period expires, use the money saved to pay off the debt. The interest earned equals your profit.

Overseas spending cards
Spend abroad on commission-free credit cards to get the best exchange rates possible. It’s a lot easier than wandering around with a money-belt stuffed full of local currency – the international expression for “mug me”.

Special offer cards
Here some glittering freebie dangles like bait to hook you onto an otherwise uncompetitive card. Take the bait, do the bare minimum to bag the bonus, then ditch the card like Jerry mouse eluding the ponderous Tom again.

A few house rules on credit cards

Credit cards are great as long as you follow the rules.

The number one rule is do not get into debt. If you run up a debt on a 0% card, for example, it should be matched by savings elsewhere. This way you remain debt neutral, since your savings offset your liability.

Do not fall into the credit card debt trap! Lenders hope that by giving you this ‘free’ money, you will eventually get sloppy, skip payments, and become another debt sucker. Don’t risk credit cards unless you’re as anally retentive about avoiding debt as a German politician in Athens.

Decided to sally forth to claim your share of lolly? Here are some rules I live by:

Choosing a credit card

  • Don’t apply for lots of cards when you’re in the market for a loan you actually need. Credit checks lower your credit score. I try to avoid more than one application every other month.
  • Card fees are OK as long as you spend enough to make sure the offer is still worth it. Maths and budget planning are required.
  • Jump in quick if an offer is good. Cashback deals can last for years on legacy cards, even when they’re closed to new customers.
  • Partners are handy if you want to revisit new customer offers. (This is not the only use for partners, I believe).

Spending on credit cards

  • Put as much of your spending as possible on (your carefully selected) credit cards to maximize your returns…
  • …but only spend what you would have done anyway.
  • Don’t withdraw cash on your card. You’ll pay fees.
  • Don’t put recurring payments on your credit card e.g. subscriptions. They can be hard to stop. Use direct debits instead.

Managing your balance and credit limit

  • Always pay off the outstanding balance in full every month by direct debit to avoid paying interest. (Except if you’re using a 0% card to stooze.)
  • Don’t exceed your credit limit. You’ll lose bonuses, pay fees, and generally wreck your upside.

Hacks and hints

  • Tippex a stripe on any credit cards that look similar to your debit card to avoid mix ups at cashpoints when you’re not paying attention.
  • Double the power of an offer by putting a loving partner on your account to increase spending. (See? I knew there was another use for them!)
  • Remember you can claim money back from your card issuer if something goes wrong with any item you’ve bought costing more than £100. A handy feature in these days of failing retailers and online shopping.

Again, there’s no shame in deciding you’d rather not take the risks of credit cards.

Wheezes like these are tasty extras for hardcore money hackers. They’re not essential for sound financial planning.

The best credit cards

The following cards are all highly competitive in their specialist category, at the time of writing.

You may well find offers that suit your circumstances better, depending on where you shop and the lavishness of your budget, so do hunt around.

Oh, and when choosing between simplicity and exception-riddled complexity, I’ve plumped for simplicity every time.

Cashback credit cards

Aim for a card that bags a cashback rate of 1% or better a year.

Favourite for cashback

Aqua Reward Credit Card
Cashback: 3%
Max payout: £100 (spend £3334 to max the cashback)
Annual fee: 0
APR: 34.9% (representative)
Issuer: Mastercard

Best feature The amazing 3% rate.

Worst feature Low initial credit limits (most applicants get £250 – £500).

  • Beat the low credit limits by paying off your account balance early. Spend £200 on the credit card, then make a £200 payment to your Aqua account via your bank. Don’t wait for the direct debit.
  • It’s aimed at consumers with a poor credit history or none at all, so it’s pretty easy to get.
  • Also best for spending abroad.

For a spending splurge

Barclaycard Cashback Credit Card
Cashback: 6% for first 3 months, 0.5% – 2% after that
Max payout: £120 for the first 3 months. £75,000 annual spend limit
Annual fee: £24
APR: 24.6% inc fee (representative)
Issuer: Visa

Best feature 6% cashback on your five biggest purchases of the month, for the first three months, if you make 15 purchases in the month.

Worst feature It’s complicated. See below.

  • Your top five monthly purchases earn 2% cashback after the 6% rate expires.
  • Except for your anniversary month when the top five rake in 4%.
  • You need to make 15 purchases a month to get the boosted cashback rate.
  • Monthly purchases beyond your top five earn cashback at 0.5%.

After Aqua 

American Express Platinum Cashback Credit Card
Cashback: 5% for first 3 months, 1.25% after that
Max payout: £125 at the 5% rate. Unlimited thereafter (spend £2,500 to max the 5% cashback)
Annual fee: £25
APR: 18.5% inc fee (representative)
Issuer: Amex

Best feature 5% introductory rate for new customers. Great when you’re about to spend big.

Worst feature Amex is not accepted by some retailers. Always have a back-up card if you go the Amex route.

  • 2.5% cashback for your anniversary month, if you’ve spent over £10,000 in the previous year.
  • Minimum household income of £20,000 required.
  • The cashback return is still good in year two (near enough 1%), if you spend over £9,000 a year.

Alternative to Amex

Capital One Aspire World Credit Card
Cashback: 5% for first 3 months, 0.5% up to £6,000, 1% £6-10,000, 1.25% above £10,000
Max payout: £100 at the 5% rate. Unlimited thereafter (spend £2,000 to max the 5% cashback)
Annual fee: 0
APR: 19.9% inc fee (representative)
Issuer: Mastercard

Best feature 5% intro rate for new customers. Good for the Xmas run-up or other big spending period.

Worst feature Complicated cashback tiers.

  • Minimum household income of £20,000 required.
  • The year two cashback return only closes in on 1% if you spend over £20,000 per year. The cashback rate is 0.7% for a £10,000 spend.

The commuter’s choice

Santander 123 Cashback card
This tricky little number is well worth a look if you spend over £100 a month on petrol, rail travel, or London Oyster cards, or you can’t stay out of places like John Lewis and Debenhams.

Rewards and flights

For those who demand their backhanders in goods and services.

Favourite reward card

Amazon.co.uk Credit Card
Reward: Amazon vouchers
1 point = 1p
Annual fee: 0
APR: 16.9% inc fee (representative)
Issuer: Mastercard

Best feature Essentially a 1% cashback card. It goes up to 2% when shopping on Amazon as £1 spent there equals 2 points.

Worst feature Can be beaten by rival rewards cards if you spend BIG at Tesco or Sainsbury’s.

  • Earn 3 points for every £1 spent in the first 90 days.
  • £5 Amazon voucher just for passing the trial-by-application-form.

Favourite free flights card

Lloyds Duo Avios Credit Card
Intro bonus: 18,000 Avios points
Miles: 1 for every £1 spent (on the Amex version)
Annual fee: 0
APR: 17.9% (representative)
Issuer: Amex and Mastercard

Best feature Relatively simple, and good if you’re a low earner.

Worst feature There are better cards if you don’t mind fees but they need a massive spend.

  • The duo bit means you get an Amex and a Mastercard. Amex is better for miles.
  • Convert Tesco Clubcard points into Avios points.
  • 18,000 point intro bonus if you apply before April 3 2013 and spend £500 per month in the first three months.

Stoozing credit cards

To best arbitrage interest rates, you need plastic that combines a long 0% spending stint with rewards thrown into the bargain.

Remember: There will still be minimum monthly repayments. Set up a Direct Debit to ensure you make them!

Favourite 0% spending card

Tesco Clubcard Credit Card
0% on spending: 16 months
Min repay: Greater of 1% of balance plus interest or £25
Reward: Tesco Clubcard points
Annual fee: 0
APR: 16.9% (representative)
Issuer: Mastercard

Best feature Other than the 0% period, Money Saving Expert calculates that the Clubcard points make this a 0.75% cashback credit card.

Worst feature A relatively high min repayment, but it’s no biggie.

  • Collect 1 point per £4 spent (£4 min).
  • Also counts as a Tesco Clubcard. So if you shop in Tesco, you get your Reward points, plus your Clubcard points (and bonus points on Tesco fuel).
  • Exploiting Tesco Clubcard points is a science in itself. As usual the Money Saving Expert guys are all over it.

Alternative stoozing card

M&S Credit Card
0% on spending: 15 months
Min repay: Greater of 2.5% or £5
Reward: 0.5% back in M&S vouchers
Annual fee: 0
APR: 15.9% (representative)
Issuer: Mastercard

Best feature As well as the 0% period, you get 0.5% back in M&S vouchers as a reward – that’s doubled to 1% for any spending done in M&S.

Worst feature No issues to report.

Prolong the stooze: Instead of paying off the debt when the 0% spending period expires, you can shift it to a 0% balance transfer card. It’s a stay of execution on the debt, enabling you to carry on racking up interest in your savings account. This only works if the balance transfer fee on the new card is less than your savings account interest rate (after tax). Remember to keep servicing the minimum payments and don’t put any new purchases on the 0% balance transfer card – it’s unlikely to give you 0% interest on new spending. You can keep deferring pay-back day like this for a while, though eventually large debts could hurt your credit score. At some point, you’ll need to take the money out of your savings and start again.

Cheap travel money

We’re after a specialist credit card that doesn’t tack commission onto its foreign exchange rates.

Favourite travelling companion

Aqua Reward Credit Card
Commission: Europe 0%, World 0%
Cash withdrawals: Fee: 3% (min £3),
Cash interest: Yes, even if paid off in full
Annual fee: 0
APR: 34.9% (representative), Cash: 39.95% – 59.95%
Issuer: Mastercard

Best feature 3% cashback even abroad.

Worst feature The low credit limit (most applicants get £250 – £500).

Alternatively

Halifax Clarity Credit Card
Commission: Europe 0%, World 0%
Cash withdrawals: Free,
Cash interest: Yes, even if paid off in full
Annual fee: 0
APR: 12.9% (representative), Cash: 12.92 – 21.95%
Issuer: Mastercard

Best feature Free cash withdrawals. Still best to avoid though as you’ll pay interest regardless of direct debit settings.

Worst feature No concerns.

  • You get £5 cashback per month for spending over £300, if you also have a Halifax Reward Current account.

Special offers

Grab the shiny thing, then toss the card away.

Quick hit and run

Barclaycard Freedom Rewards Credit Card
Freebie: £30 shopping voucher
Condition: Earn 10,500 points by spending £500 in the first 3 months.
Annual fee: 0
APR: 18.9% (representative)
Issuer: Visa

Best feature Low hurdle freebie and good range of retailers.

Worst feature The reward scheme is complex and points are generally worth less than half a penny each.

  • Earn 1 point for every £1 spent. 2 points at supermarkets and petrol stations and 3 points with certain retailers.

Eyes on a bigger prize

American Express Preferred Rewards Gold Card
Freebie: £100 gift card or BA flights
Condition: Spend £2,000 in the first 3 months
Annual fee: £125 (free in first year)
APR: It’s a charge card. £12 fee if you don’t pay the balance off
Issuer: Amex

Best feature Fly to major European capitals or spend the gift card in the likes of Amazon or M&S.

Worst feature You pay taxes on the flights. Around £30 per person.

  • Spend £2000 in three months and you’ll earn 20,000 Reward points to spend on the freebie of your choice.
  • Cancel the card so you don’t cop the big fee in year 2.
  • Two complimentary airport VIP lounge passes.
  • Double points on travel, petrol and supermarket spending.
  • Min household income of £20,000.

Closing credits

So that’s our pick of the best credit card deals available. We hope you find a useful flexible friend among that lot. If anyone has a better choices then please let us know below and we’ll add it in.

Do remember we are not financial advisers. The above pointers are not any sort of personal recommendation as to what you should do. The only thing we’d recommend to everyone is do your own research.

Take it steady,

The Accumulator

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{ 36 comments… add one }
  • 1 gadgetmind November 27, 2012, 11:19 am

    I use a FairFX pre-paid for overseas money.

    And to avoid cash point problems, I use one PIN for all credit cards and one for both debit cards.

  • 2 gadgetmind November 27, 2012, 11:26 am

    Oh, and for credit cards, we use our M&S card in M&S and our John Lewis card in John Lewis and Waitrose as the latter also gives 1% back in store. Both are paid off in full by DD.

  • 3 Neverland November 27, 2012, 11:37 am

    I find the whole UK obsession with credit cards rather perplexing and tawdry

    Credit cards barely exist outside of the UK in most of Europe…strangely this leads to consumer debt being much lower!

    To my simple analogue brain if you can’t afford to pay for something in cash don’t buy it

    I can sort of make that exception for a house but even that I have problems with

    All these credit card gimmicks are just a trick to make you spend money you don’t have

    The very marginal benefits this plastic offers seems outweighed to my mind with the hassle of watching you do not fall foul of the various other charges they want to levy

    When I see an oversized purse or wallet open up to reveal 20 shiny gold cards I don’t see a “successful” person…I see a schmuck

    My lonely Barclaycard stays firmly tucked into the back of my wallet. never seeing the light of day

  • 4 gadgetmind November 27, 2012, 11:42 am

    I could afford to pay cash, and do a lot of day-to-day spending with cash at markets, but use CCs where I’ll benefit from the cash back and/or from the additional consumer protection.

    If you pay off in full by direct debit, and don’t use them in cash points or overseas or where retailers charge levies, then there will be no additional charges.

    However, we all have the choice of whether to use them or not, and choice is good.

  • 5 Neverland November 27, 2012, 12:39 pm

    @Gadgetmind

    The recent history of the Ireland, Spain, UK, USA etc. would seem to indicate that in the context of consumer credit

    choice =/= good

    In Germany however, very few people have credit cards…

  • 6 gadgetmind November 27, 2012, 12:56 pm

    That’s the thing with choices: sometimes people make the wrong one.

    But just because some people get things wrong, I’m not prepared to have my choices reduced, which is sadly what often happens.

    As for Germany, their backward approach to paying with plastic has often caused me problems, as has their habit of closing restaurants ridiculously early in the evening.

  • 7 MR Jones November 27, 2012, 1:07 pm

    I lived in Germany for 2 years and their extreme preference for cash over cards is very annoying. My pockets are always jangling with coins when there and often vending/ticket machines for public transport do not accept €50 euro notes and only very specific locally issued cards. It’s amazing the lack of penetration Visa and MasterCard have in the market place but partly it’s due to the fact that the credit card fees charged to retailers in Germany are more than twice as high than the UK as the local banks prefer card holders to use the local EC Cash/Girocard which goes within the German domestic banking system…

    Anyway, if you can afford the annual fee £300+ and get accepted then get an Amex charge card. The benefits and worthwhile especially if you travel a lot.

  • 8 Simon November 27, 2012, 1:23 pm

    Perhaps worth adding that there’s a version of the Amex Platinum cashback card that charges no fee. It has a higher interest rate, of course, but that’s irrelevant if you’re sensible and stick to the rules outlined above.

  • 9 Neverland November 27, 2012, 1:30 pm

    @Gadgetmind

    That might be fine if the consequences of stupid behaviour were borne by the individual who made the choice to borrow irresponsibly

    Instead the costs of irresponsible credit card borrowing are socialised through IVA/bankrucpty (which i can’t even spell) into either:
    – higher costs for other bank users
    – losses in a UK banking system largely owned and underpinned by taxpayers already

    To put it simply, why should I pay for other people’s chance to borrow irresponsibly?

  • 10 gadgetmind November 27, 2012, 2:08 pm

    People who want to borrow irresponsibly will always find ways of doing it. What we need to do is make it harder for them to wriggle out of their debts and get a clean slate after just a few years.

    Anyway, I’m not prepared to do is carry enough cash to pay the hotel bills for myself and seven colleagues who are staying at a German hotel for ten days and also need to eat and drink. And yes, this did once happen when I tried to check out!

    And I also like to be able to grab a few bottles of my favourite whisky when it’s at a good price without needing to always have the reddies in my pocket.

    I use credit cards as cash-back debit cards and wouldn’t thank anyone who tried to discourage me from doing this, not even if they did consider it was for my own good.

  • 11 Tyro November 27, 2012, 2:53 pm

    I’ve just recently got an Aqua card, and it’s a great deal for anyone who’s well-organised, pays the full amount outstanding off each month, and reads the small print. A couple of things to watch out for: first, if you fail just once to make a payment on time, you lose the cashback for the whole year. And, even if you set up the direct debit at the point of activating the card, it may not be in place to take a payment for the first statement, so it would be easy to inadvertently fall foul of this and lose your cashback. Second, when Aqua calculates cashback at the end of your first anniversary they round it down to the nearest £5, so unless you time your spending carefully in the final stretch you could potentially end up spending £160+ or so that you don’t get the cashback on.

  • 12 Tyro November 27, 2012, 3:04 pm

    PS: forgot to mention re the very low credit limits with Aqua – I didn’t request or suggest any particular limit and they decided to let me have something close to a couple of grand (not being coy, just can’t remember!), admittedly small compared to what other card companies award but, since I’m not a big spender anyway, more than enough.

  • 13 Jonny November 27, 2012, 3:08 pm

    Interestingly, there’s no mention of the £5 reward on the Halifax site (that I can see).

    Buried deep in the FAQ however it does say:
    “Where can I apply for the Clarity Rewards Credit Card?

    Eligible customers can apply for the Clarity Rewards Card by visiting one of our branches.”

    So I assume it is the Clarity Rewards Card that is needed. Maybe they’re slowly withdrawing it???

  • 14 Luke November 27, 2012, 3:09 pm

    That’s interesting Tyro – I haven’t come across anyone who was offered a credit limit of more than £750 with Aqua before.

    Also worth noting that if you’re generally well behaved and polite to their customer service, you can go over the credit limit by a very small amount on a single occasion without losing the cashback. This is, however, entirely at their discretion and only works once!

    Faster payments at the end of the day are definitely the way to prevent this happening.

  • 15 HHR November 27, 2012, 3:20 pm

    very good advice in this article – thanks for putting this together! over at moneysavingexports there’s a good section too, but this article is much better curated, well done.

    regarding the comments so far:
    if you’re good about spending, then why not take advantage. as long as you observe the golden rules of paying off in full, you should be fine.
    plus if you have work related expenses, credit card is a must; it’s the only spending i put on my credit card actually.

    regarding the Germany specific comments: i’m German, moved to London over 7 years ago.
    @gadgetmind: a lot of german restaurants do stay open late, it totally depends where you go 🙂
    @all: there is a lot of card spending in Germany BUT it’s almost only done on domestic bank cards (“giro/ec card”). most retailers will only accept those because Visa and Master charge more.
    since pretty much every german with a bank account will have a bank card, there’s no problem – but of course it’s annoying for visitors.
    however, as i am now a visitor to my home country, i find that A LOT of restaurants and shops do take visa/master. the exception being discount supermarkets such as Aldi, Lidle, Penny etc.

  • 16 Neverland November 27, 2012, 5:31 pm

    @HHR

    bank card = debit card?

  • 17 HHR November 27, 2012, 5:39 pm

    @neverland: yes, though i believe it’s different to e.g. Visa Debit, because afaik you can’t use the “giro/ec-card” (“bank card”) for online payments, but i could be wrong; haven’t had a German card one since i moved to the UK

  • 18 MJ November 27, 2012, 5:47 pm

    @HHR @neverland the giro/ec-card cannot be generally used online, instead German customers with these accounts often can do online bank transfer payments by entering their account number and sort code instead of card number – one provider of this is known as Sofort Ueberweisung. However, many giro/ec-cards also have a Maestro badge on them so can be used outside of Germany as a Maestro card (known as co-branding). When the card is used in Germany it will be as giro/ec-cash and will not go through the standard visa/mastercard bank processing systems, instead it goes through a local German platform but when used abroad as a Maestro card it goes through the standard infrastructure just like any other cards processed in other markets.

  • 19 An Admirer November 27, 2012, 7:50 pm

    Good article – thanks.

    Good tip on the joint card. This is really useful as you can see in one place exactly what you (both) spent each month instantly, so very useful for budgeting. Multiple cards gets too confusing for me!

    I don’t think anyone should have a credit card unless they intend to pay off in full each month. It is loaded weapon and you have to handle it accordingly. Consumer education is really bad here, for obvious reasons. The FSA should force the issue of health warnings like on a packet of cigarettes: Credit Cards Can Serious Damage Your Financial Health.

    Never tried stoozing – I’m not well organised enough and it seems a bit too much like picking up pennies in front of a steamroller – particularly with savings rates what they are nowadays!

    Good luck to all!

  • 20 ermine November 27, 2012, 8:40 pm

    blimey, has Martin Lewis hacked into the account round here?

    Yeah, I’ve stoozed in the halcyon days when a) cards gave you enough credit in the first place to work with ie > £5000 and b) they gave you a decent rate of return. A particular bugbear of mine are all the lying toads who advertise a 0% transfer for 6 months with a 2.5% handling charge. That’s a 5% APR in my book.

    I can’t be bothered with such low-rent activity any more. It’s simplified my life a little. Each to their own, though. I used to get a buzz out of getting them to pay me but working out the hourly rate of all the form-filling and eating the junk mail and spam afterwards took the shine off it for me 🙂

  • 21 gadgetmind November 27, 2012, 9:04 pm

    > blimey, has Martin Lewis hacked into the account round here?

    Unlikely as he’s sold out and fled to a beach in a tax haven. Probably.

    However, I’m sure we all appreciate that part of successful investing involves not spending too much, and while credit cards can be a powerful force to stoke the fires of overspending, used sensibly they can act in the opposite way.

  • 22 ermine November 27, 2012, 9:19 pm

    > used sensibly they can act in the opposite way

    as somone who raised their house deposit on MBNA 0% (real 0%) finance I couldn’t agree more, and they did the same for me when I moved, and I still didn’t pay them any interest or the shocking price of a bridging loan. But the card companies seem to have gotten wise to most of the wins here, it seems a lot of work for little return these days IMO. Each to their own. Just be careful out there 😉 I’m sure they make their money on the bazillions of penalties for screwing up – I always used to direct debit the minimum amount each month. Just in case…

  • 23 gadgetmind November 27, 2012, 9:23 pm

    Paying the minimum by DD every month is the most comment screw up that people make and is where the CC companies make most of their money.

    Pay the lot, in full, every month, without fail.

  • 24 The Accumulator November 27, 2012, 9:45 pm

    Nice one, Ermine, and great comments all. Didn’t expect to learn so much about the German payments system. It’s always interesting to discover these little cultural quirks – like Minitel in France.

    I’m on Gadgetmind’s side of the debate. I didn’t get my first credit card until I was age 27. I’d swallowed the stories about it being some kind of mind control device that would make me spend like Tamara Ecclestone. Turned out to be nonsense of course, cos I was more disciplined than I gave myself, ahem, credit for.

    Neverland – I pay higher car insurance cos some people irresponsibly make phantom claims, I pay higher prices in the shops cos some people thieve, I pay higher taxes cos some people avoid them… most goods and services have negative side-effects due to abuse, but those need to be set against their utility. We pay for some people to borrow irresponsibly so that most people can borrow responsibly, with all the economic benefits that brings.

  • 25 William November 27, 2012, 11:56 pm

    Can I advise that Metro Bank Debit Card and Credit Card can be used overseas – worldwide without any fees – only exchange rate applied by Mastercard.
    I moved to them when they first opened as they offered this excellent perk at the time Nationwide BS was removing free overseas use from their Flexaccount.

  • 26 ermine November 28, 2012, 12:04 am

    > Pay the lot, in full, every month, without fail.

    Yup (assuming no 0% deal). But the DD was always a backstop in case I screwed up… They craftily don’t let you DD the whole amount.

  • 27 Paul S November 28, 2012, 10:49 am

    I pay off my CC (HSBC Mastercard) in full by DD every month, always have…..don’t know why ermine has a problem.
    More importantly travelling without a CC in much of the world is difficult. Showing a CC checking in to a hotel is usually required and hiring a car without a CC is simply impossible. No CC, no car.
    One worthwhile tip for travellers…..always have the card charged in local currency, the Xrate from your card provider will generally be much more favourable than from your goods and services supplier.

  • 28 MJ November 28, 2012, 12:47 pm

    @PaulS paying in your local currency is not neccesarily cheaper. When you pay in own currency it’s called Dynamic Currency Conversion – the rate applied will be around %2.5-%3.5 on average (this is decided by the credit card processing bank and the merchant in their own contract). The benefit of DCC is that by Visa and MasterCard rules the merchant has to show you how much you will pay in your local currency before you accept the transaction.

    If you pay in local currency your bank or credit card provider will add a mark up of a similar amount to above in fees to cover their foreign currency risk – AMEX charge me %2.75 for instance. Fees will always be charged in some way as banks do not currency rates in real time (daily is usual, perhaps more often but not real time), therefore they will need to have some kind of fee mark up to cover themselves to currency fluctuations – of course this makes them money also as their spread is usually above the normal fluctuation amount.

    The disadvantage of paying in local currency is that you do not see the GBP amount before you make the purchase – something which DCC does give you. Previously there were issues of cardholders having DCC performed on their accounts without them wanting it – VI/MC now audit this and apply very high fines if this ever happens… Remember, there is always a margin especially with foreign currency swaps/payments and someone will always apply it as there is risk of FX on their side.

  • 29 gadgetmind November 28, 2012, 12:52 pm

    This why I have FairFX dollar and Euro cards. Yes, there is some loss of flexibility, and you need to pre-pay for the currency, but I’ve always been happy with the rates and service.

    It’s also good for when kids are travelling as you can feed funds across from your card as and when.

  • 30 Steve November 28, 2012, 1:19 pm

    — “I find the whole UK obsession with credit cards rather perplexing and tawdry” —

    In Italy, I have a Visa card from my bank but the total is always taken from my account every month. Once I’d got used to this, I realised it was much safer. Like many people, I had plenty of credit card bills getting out of hand in the past.
    I still have my Lloyds credit card for emergencies, but haven’t used it for a few years. They still send me statements and warn me about not paying the minimum amout, even though I’m actually 20p in credit!
    Steve

  • 31 David Stuart November 28, 2012, 3:21 pm

    How are you saving if your spending or tempted to spend more?

  • 32 Paul S November 28, 2012, 6:23 pm

    @MJ. I was suggesting using the local currency, the currency of the country where the purchase is made. My card does not charge a fee for the conversion and the Xrate used always seems to be advantageous compared with the offered conversion. Obviously there is a spread, the bank has to make a profit.

  • 33 MJ November 28, 2012, 6:27 pm

    @Paul S – I understood that you meant local currency. The offered conversion will differ per merchant location – usually the acquiring bank will be 2-4% mark up. There is no such thing as no fee, this is your bank’s marketing being a success! The fee is contained within the spread – at least %2 from your bank also… I’m not saying you’re wrong, I’m just saying it’s not black and white and sometimes people at least like to see how much they are paying in their home currency.

  • 34 The Investor November 28, 2012, 7:15 pm

    Obviously Stoozing isn’t what it was in the day, but it’s worth remembering that inflation is running closer to 3% than 2%. So on a real returns basis it’s a bit more attractive than it might look otherwise, in our low yield world, especially the spending variety.

    I’ve just got a new M&S card for a 15 month stooze session, partly because of cashflow management caused by my capital gains tax issues this year, but also because over that time frame 2.5% inflation plus say 3% gross interest plus 1% in M&S vouchers is better than nothing.

    Direct Debit minimum amount all the way, obviously.

    And absolutely agree nobody *needs* to do any of this unless they want to — and certainly if they’re not confident they’ll be careful and diligent on repayments and (to David Stuart’s point) disciplined about their spending.

  • 35 bmf December 2, 2012, 12:04 am

    ermine – my sentiments exactly. If you need to mess around funnelling all your purchases through amex to garner £200 per anum then just man up and get a better job. It’s pathetic.

    Also credit cards are socially harmful and force the price of all items up. Where do you think that £200 comes from? They are middle men scamming off of pure cash. I withdraw cash specifically to avoid letting the bank get anything from my independent grocer. Starve these scumbags out.

  • 36 The Investor December 3, 2012, 9:48 am

    @bmf — I get where you and ermine are coming from, but really it’s not a big hassle. It’s just a different card handed over, and the need to have a back up for those who don’t take Amex. £200 might not seem like much, but four or five of these hobbies add up (e.g. cashback, stooze, religiously switch energy providers, use online cashback sites when purchasing through e-retailers (I don’t do this but probably should), tend towards choosing restaurants (that you like!) for more casual eat-outs via what offers are available). Pretty soon you’ve made £1K (net, so say £1,500 gross equivalent) at little effort, and had a bit of fun doing so.

    Each to their own, absolutely, though. I see people with bundles of coupons online and I wonder what planet they’re on, so there’s clearly a scale…

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