Are any credit cards worth getting for the rewards?

[Whiternoise]

I was just wondering whether there are any upsides to getting a credit card. I have a student mastercard that i use for buying stuff from America or from people that don't take debit cards, i just pay the money in and then spend it so it never goes into debt.

I don't want a card for the spending power, in fact i'd rather it had a low limit that i had to pay off regularly so i don't even have the option of being tempted.

Since credit card companies always harp on about free offers (i.e. my gran has a Virgin card and gets free flights every now and again), are there any that are actually worth using?

Presumably they all work on the principle that there's no interest provided you pay back your money on time before the end of the month - in my case it would be paying it off as i spend it. I've had a look at moneysavingexpert and there's lots of good info there, but just seeing what people's opinions are here!

[666moe666]

I have the Tesco one for Clubcard points.

Sounds sad, but as I have a part time job there i amass a lot of points from using the discount cards/clubcard. I then trade the points, when the vouchers come, for airmiles

[finlay666]

Play.com, 1% cashback for points/2% for purchases from play.com
Spend £150 get £15 vouchers (can pay off then cancel the card once redeemed if you wanted to)
9 months interest free
It's from mbna though

I cancelled my student card, it was a horrendous deal compared to a standard card

[Saracen]

Yes, there are credit cards worth getting for the rewards, but which ones they are and whether they suit individual users will depend on how you'll use it and your circumstances. For instance, some offer (or did last time I looked) a decent annual travel insurance package but it was a card that required a reasonably good income level of a fairly high balance on a linked bank account.

And, of course, if you don't travel abroad much it probably isn't worth going for such a card.

There are a variety of benefits from different cards but, by and large, they either require you to be spending on it, or to meet other criteria. Cashback, for instance, isn't much use if you don't spend much on it.

There are other reasons why having one might be a good idea, though .... though it probably isn't what you meant and you might know the next bit already anyway. One reason is that the Consumer Credit Act gives added protection for items bought on credit cards by making the credit card company jointly liable with the retailer. It only applies to items between £100 and £30,000 though, and there are some other issues relating to single items versus single transaction in whether the value is between £100 and £30,000 or not, so it isn't quite as clearcut as it seems. But, for instance, book a holiday or flights on a credit card and (within those limits) you'll at least get some protection if the holiday company (or airline) goes bust with your money. Ditto buying computer bits (etc) where the company takes the money, then folds before you get your bits, or where the bits subsequently fail under Sale of Goods Act, etc, and the company has gone down.


And another thing that might not be quite so obvious. From your post, I'm assuming you're quite young (the student bit, though that doesn't necessarily mean you're not a mature student). But if so, sooner or later you're going to need a good credit record. One way to help achieve that is to get a card, don't use it too much and pay it off on time. Then, when you come to want a car loan or mortgage (etc) in a few years time, they can look back and see that you've accessed credit, used it responsibly and paid up when you should. It makes you a better risk.

BUT .......


.... it cuts both ways.

How good at self-restraint are you? How organised are you?

If paying off a card regularly does your credit rating good, so paying it off late, going over the limit or, worse yet, getting into a mess and defaulting, does your credit rating harm.

Also, getting things on a credit card and then not paying off the whole balance can be a seriously expensive way to borrow money. You're better off with a loan, or an overdraft facility, or simply doing without.

And moreover, credit cards are dangerous. It is seductively easy to get into a mess, especially if you make assumptions that prove to be wrong. For instance. you fancy a new PC (or car, or whatever) and you have a job that means you can affords it, so you bung it on the card and never mind that the interest costs a bit more, it's just so easy, and after all, you can afford it, right?

But then, with a couple of grand on the card (it was a nice PC ) you lose your job, and being a recession, can't get another one. Or worse yet, are ill or in a car accident and can't work for months. Before you know it, you can find yourself struggling to eat and pay utility bills, let alone paying off a credit card .... and the interest continues to mount up. You spend months paying off the minimum, you get nowhere in dropping the balance, and the interest takes it up and up. So you stop paying it because you simply don't have the money. First, you get rude letters. Then you get default notices. Then you get debt collectors chasing you and, perhaps, county court judgements. Guess how badly your credit rating is now shot? And if really bad, you end up declaring yourself bankrupt and your credit history (and chances of a mortgage) are seriously damaged, or more likely, shot to hell, for some years. And all because you wanted a new PC, then got into a car accident.

So really, seriously, think before taking out a credit card.

They're not the spawn of the devil and IF you use it sensibly and don't put yourself in dodgy situations, or aren't unlucky if you do, then they can be useful. But they have real dangers that can seriously affect your financial health for years to come too.

My advice .... if the only reason for doing it is for a freebie or two, don't do it. But if, given all the above, you're confident you can avoid the pitfalls, then .... hunt around. And make sure you pay off the balance every month and don't put stuff on it unless you're absolutely sure, come what may, that you can settle it.

[SiM]

The amex platinum does 5% cashback for the first 3 months

[tiggerai]

I have the Tesco one for Clubcard points.

Sounds sad, but as I have a part time job there i amass a lot of points from using the discount cards/clubcard. I then trade the points, when the vouchers come, for airmiles

This. I use mine for everything.

I've racked up about 2000 airmiles this year - enough for a couple of free zone one flights and I've now got enough for 2 zone 2 flights...

Came in very handy when i put 6k through it when I bought my house too. I know a couple of people who have done this.

I pay the minimum by DD so I can't forget and then pay off everything else.

[0iD]

This. I use mine for everything.

I've racked up about 2000 airmiles this year - enough for a couple of free zone one flights and I've now got enough for 2 zone 2 flights...

Came in very handy when i put 6k through it when I bought my house too. I know a couple of people who have done this.

I pay the minimum by DD so I can't forget and then pay off everything else.

+1 on the Tesco card here too, if you have a family like me you can use the accrued points for days out during the summer Keep the kids happy.

[jim]

The Amex platinum is the best for cashback, if you can't get that go for Play.com. If you can't get that, leave it until your credit rating improves. Yes, there are benefits for using credit cards (in my eyes) - section 75 protection being one, delaying your payments being the second, and cashback the third.

But there are two things you have to be wary of - firstly is not paying off your card in full. Set up a direct debit for the full amount every month, and you'll never miss a payment, so no horrendous charges. If you don't pay off a rewards card, you will be stung to hell and back, because that's the catch.

Secondly is your credit rating - always be careful not to apply to too many cards. Some people apply for credit cards to get freebies, like say a £50 M&S voucher, which is fine. However, apply to too many in a short space of time and you're credit rating will be mashed. Then people panic and apply to one with a lower "rating limit", but don't get that one easier. So they go down another level, but because they've hurt their limit again they can't get that either. And then it's a downwards spiral. When you urgently need a loan or mortgage after that, you're completely stuffed, and it'll cost you a lot more than the "rewards" ever gained you.

So my advice would be to pick two cards that would benefit you - assuming that you're happy you won't have any problems paying them off and are comfortable with the payment schedule - and then apply to the best one. If that fails, then apply for the second one. If that fails, give up and wait a year.

I've been rejected for three credit cards (play.com included) in the last 6 months so I'm going to leave it... probably for the next four years to be honest. In the midst of all my applications Capital One raised my limit to pretty much match my salary so until I leave university I'm virtually certain that it will be sufficient.

[LWA]

I used a Barclay Card Platinum cash back credit card for almost all purchases as it offers 1% cashback. I then pay it off in full every month.

I also use a Tesco Credit card for anytime I go to Tescos.

[mikerr]

Don't forget to signup to quidco.com and then you'll get £20 or so cashback just for getting the credit card !

(I got £27 for Amex, and £20 for Halifax...)

Oh, and have to quote this:

paying off your card in full. Set up a direct debit for the full amount every month, and you'll never miss a payment, so no horrendous charges.

Yup - if you don't pay off your credit card every month, then a credit card isn't for you.

[benjus]

If you're buying stuff from America you could save a bit of money by getting a Santander Zero or Post Office credit card, as these will not charge you anything for spending in foreign currency.

My Nationwide credit card is also competitive for foreign use (free in Europe, 1% outside) and it gives me a year's free extended warranty on electrical goods, which has come in handy on a couple of occasions.

I have had cashback cards in the past but they are no longer offering cashback and I haven't bothered to get new cards. You can earn a few extra quid if you're prepared to switch cards every now and then as the cashback deals come and go.

I find credit cards very useful, but I pay mine off in full by direct debit. Be careful of using a credit card for borrowing and if you do it make sure you know exactly how much interest you are paying and how your payments will be applied to the account.

[GheeTsar]

I use the LloydsTSB airmiles cards - 1 Airmile for every £10 spent on Amex or for every £50 on Mastercard. I have it set up to pay off in full each month automatically and ensure I don't buy what I don't already have the money for - therefore never incur any interest charges.

With a fairly quiet spending year for me I have enough points for two free return flights to Paris.

[Zak33]

John Lewis card... called a partnership card.

Once per quarter you get a few vouchers for John Lewis and Waitrose.

[finlay666]

Yup - if you don't pay off your credit card every month, then a credit card isn't for you.

I disagree, only for ones that have promotional interest free periods though, I pay off more than the minimum on mine but with an interest free period until March or so next year I have put the money to one side to get interest/investment from it

[tiggerai]

I disagree, only for ones that have promotional interest free periods though, I pay off more than the minimum on mine but with an interest free period until March or so next year I have put the money to one side to get interest/investment from it

Same here, some careful 0% management this year means that I don't need to get an 8% loan to dig me out of a hole.

[Workaholic]

My Egg World Mastercard is quite decent for the following things:

1% cash back Egg Money is a credit card that gives you 1% cash back on all your spending (maximum £200 cash back per year; if less than £5 no cash back is payable).

Protection for the things you buy A range of purchase insurances included as standard, all with a zero excess so with Egg Money you can spend with confidence. Insurances included are: missed event cover, purchase protection, extended warranty, price promise and travel accident.

Note. Extended Warranty essiently adds an extra year of warranty.
I also get a small insurance if whatever I buy gets stolen with 90 days they re-imburse me...