Wednesday, August 11, 2010

Why you should always pay by credit card - best credit card deals

"Last week, I used my Visa to pay for my bacon sandwich and said I expected I was the only one using a credit card for my breakfast. ‘Oh no,’ said the assistant. ‘Everyone’s doing it.'"

– Melanie McDonagh (Evening Standard 10th August 2010)

Well, there’s nothing wrong using credit cards all the time. You heard that right. But that comes with a huge caveat. Provided that you are able to pay off your credit card bill in full every single month, there is absolutely no reason why you shouldn’t pay for every single purchase or service with your credit card.

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On the face of it, it does make perfect sense. If a charge is made on a credit card at the start of say June, you are liable for that only in mid-July. Effectively, you’re able to borrow on your credit card interest free for more than a month. Because of that, I even buy a pint of milk (45p) with my credit card.

Good credit card deals to be had

I wrote about how difficult it is to get a credit card approval in the UK. However, once you are deemed credit worthy by credit institutions, there are actually quite a bit of good deals available in the market. Generally, I prefer cashback instead of points or voucher rewards as the latter tend to be redeemable only for purchases in-store. The two best cashback cards that I’ve come across are

American Express Cashback Platinum

This card allows a 5% cashback for the first three months (up to £100). Subsequently, cashback ranges from 0.5%-1.25% (increases as total amount spent increases). One catch for this is that you’ll have to charge £3000 per year to the card before cashback kicks in.

Like most cashbacks, it’s credited into your card only after a year counting from the card approval date. No admin fee chargeable and there’s no limit on how much cashback you can get save for the £100 limit for the first three months. For more details, head to American Express.

Egg Money Card

Now, despite what Amex advertisements say, not all places accept Amex cards. That’s where your Egg Money Card comes in. Being a Mastercard, your Egg card
fully complements your Amex. Amex not accepted? No worries, whip out your Egg card instead.

Unlike Amex Cashback card, Egg Money Card charges a £1 fee on a monthly basis. As it provides a flat 1% cashback on all charges to the card, cashback really kicks in only after you have charge more than £100 per month on the card. One more restriction – the maximum that you can charge to this card per year is £20,000. In other words, the maximum cashback you can get is £188 per year [1% of £20,000 - £12 (£1 per month)].

One more thing to note is that Egg requires that you repay its bill via a monthly direct debit. For more information, refer to Egg Money Card.


How to get the most out of this

Apply for Amex just before a huge purchase to take advantage of its 5% cashback for the first three months. Just make sure that the merchant accepts Amex to begin with. After the first three months are up, get your partner to apply for another one thus effectively prolonging the 5% cashback by a further three months. Just make sure that both cards are charged at least £3,000 each by the end of a year to entitle for a cashback.

After six months, go apply for one Egg Money Card and charge every single thing to that one card. Oh, just remember to pay all bills on a timely manner.

Do you know of any other good credit card deals?

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