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Money for nothing from your credit card

Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

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Play your cards right to get cash and other bonuses for free...

As a nation we are getting wiser with our spending, becoming more aware of ways to save money and get cheaper deals on our bills, utilities and services. But while spending less is very satisfying, surely making money for nothing is better?

If you have already found the cheapest deals for all your utilities then this article will help you take things one step further - showing you how picking the right credit card can actually make you money as well as other exciting rewards.

Virgin Atlantic credit card

	3,000 Flying Club miles upon first spend with the Virgin Atlantic Credit Card

For years credit card companies have been making millions of pounds from their customers, but if you play the credit card game well, you can use credit cards to your advantage and make hard cash! We will look at a variety of ways that you can make the most of credit card offers and show you how to avoid the pitfalls.

Whether you want to benefit from a quick fix introductory offer or use a longer term ‘stoozing’ method to make your cash, we explore all the options.

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Health Warning

To benefit from these money making tips, you must be incredibly disciplined with your money. The costs will vastly outweigh the benefits if you forget to make payments on your credit cards.

The most important factor in making money from your credit card is ensuring that the complete balance is paid off at the end of every month (or before a 0% offer ends). If you have any doubts about whether you will be able to do this then don’t even think about getting a credit card to make you money – it won’t work.

If you have any outstanding debts or tend to ignore bills or forget to make payments then stop reading now. Getting a credit card is a serious commitment and should not be undertaken lightly.

If however you are excellent at managing your finances, always pay your bills and feel in control of your money then read on. Make the most of your diligence and start making cash now…

Just don’t apply for lots of credit cards at once as being rejected can damage your credit rating.

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Make money on your existing credit card

If you already have a credit card then this is a simple way to make a bit of extra cash that works by letting you earn interest on money you’ve already spent. All you have to do is choose to use your credit card more often for purchases you would normally make in cash or by debit card - for example food, petrol and other everyday items.

When you make a purchase with a credit card, you are basically allowed to borrow free of interest for a period of 45 to 59 days, depending on the card. So, you might as well make your purchases with your credit card, leaving your hard cash in a high-interest current account for a bit longer to continue earning interest.

This technique is great in that you can use it with any credit card, but it will only be effective if you pay off the full balance of the card at the end of each month, otherwise it will cost you more than you’ll earn from it.

Flash the Cash Example

Alliance and Leicester (www.alliance-leicester.co.uk) is currently offering a massive 8.5% interest AER on its Premier Direct Current Account. Putting purchases on your credit card and leaving your monthly spending budget of £1000 in this account each month before paying your credit card balance could make you up to £85 per year (minus tax).

Complete guide to current accounts >>>

Compare current accounts >>>

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Introductory offers

Credit companies make so much money from their customers that they are often willing to pay money to acquire new ones, and that means freebies! The incentives they offer are small costs compared to the huge potential profits they will make from the customer in debt, but if you ensure that you pay off your balance at the end of each month, you will never be charged interest and you can enjoy all these incentives without giving the credit card company anything back.

To get most incentives you will have to spend on your credit card. Some credit cards don’t have a “minimum spend” before you get the incentive so you can literally buy a packet of crisps, wait till you receive your freebie and then close the account if you choose. Other cards do have a “minimum spend” - all you have to do with these is start paying for your everyday purchases with your credit card until you reach the target and then you will get your reward.

Many Reward credit cards and Airmiles credit cards have introductory offers which give you a lump sum of points or a free flight when you have achieved the minimum spend – see the sections below for more details on these.

Flash the Cash Example

If you get a Sony Credit Card (www.sonycard.com) and make any purchase within the 90 days and you will receive 3,000 “Pulsebeats”, which can be exchanged for a range of Sony products – 3,000 “beats” will get you up to two free DVDs or a PlayStation 2 game.

Compare interest free credit cards

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Reward credit cards

Reward cards allow you to collect points for every pound you spend and then exchange these points for products and services. The more you spend the more points you will get and the more expensive rewards you will be able to choose from.

Flash the Cash Example

The Amex Nectar Card (www.americanexpress.com) allows you to collect two points for every £1 spent in participating stores (including Sainsbury’s and BP) and one point per point for every pound on all other purchases. It is also offering double points for the first three months and a bonus 5,000 points if you spend £200 in these first three months.

Say you spend £1,000 a month on this card (including £500 on food from Sainsbury’s and fuel from BP) then in one year you will have earned 27,100 points (including double points and the 5,000 points bonus). You can exchange these points for a variety of luxury rewards including an iPod nano 4GB, a Sony Cybershot camera or 24 bottles of wine.

Complete guide to reward credit cards >>>

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Airmiles credit cards

Airmiles credit cards work a lot like reward cards but instead of collecting points you collect airmiles, which can then be exchanged for free flights and sometimes other travel expenses like accommodation. The value of “airmiles” varies from card to card so look at how many you need to fly to a specific destination as well as how many you earn per £1 when choosing a card. If you are keen to travel then an airmiles credit card could save you plenty of cash.

Flash the Cash Example

Get the BMIbaby credit card (www.bmibaby.co.uk) and you will receive a free return flight anywhere on the BMIbaby network if you spend £100 in the first 90 days of having the card. If you then spend £3,000 in a year (£250 a month) you will receive another return flight, absolutely free.

Watch out – some “free flights” will not include taxes, fees and charges so always check the terms and conditions of the card you are interested in.

Complete guide to airmiles credit cards >>>

Compare airmiles credit cards >>>

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Cash back credit cards

Cashback credit cards are probably the easiest and most effective way of making money from a credit card. They literally give you a percentage of the cash back for every purchase you make. For example, if you spend £100 on a 1% cashback card, you will receive £1 back. Most cashback cards will present you with your cash annually but a few will pay monthly.

Typically, the cards offer around 0.5-1% cashback, but some cards will offer up to a whopping 5% for introductory periods or for purchases of specific items – these are the ones to look out for.

Flash the Cash Example

The AMEX Platinum MoneyBack credit card (www.americanexpress.com) is currently offering a massive 5% cashback on the first three months of purchases on your card (up to a maximum of £4,000) followed by tiered rates up to 1.5%. Even if you only used this card for the introductory period, spend the full £4,000 on it and you will receive £200 back, easy money!

Complete guide to cashback credit cards >>>

Compare cashback credit cards >>>

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Charity credit cards

Charity cards promise to make a donation to a good cause every time you make a purchase. The donation is worked out as a percentage of what you spend and while some cards offer slightly more reasonable rates, most are set at a pathetically low 0.25%. That means for every £100 you spend, the charity will receive 25p, a pittance.

These cards are one way to give money to charity but they are by no means the most effective or beneficial for the charity. If you want to donate effectively, get a really good cashback card and donate your annual payout to your favourite cause. This will be a much healthier sum and is also eligible for GiftAid, which will further boost the effect of you generosity.

Complete guide to charity credit cards >>>

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The 0% purchases trick

The 0% purchases trick basically allows you to make money by earning interest on money you have already spent, for a long period of time.

The trick has five steps:

Get a credit card that offers a long period of 0% interest on purchases.
At the beginning of each month, transfer the money you would spend that month from your current account into a high rate savings account.
Now, every month put all your purchases on your new credit card. Don’t use this new credit as an excuse to spend more though, just spend what you normally would.
Make minimum repayments every month.
Just before the 0% offer runs out, transfer all the money you have moved to your savings account back to your current account and use this to pay off your credit card completely.

At the end of this period you should have earned a fair sum in interest on your savings. The only disadvantage to this scheme is the effort of moving your money around, but if you can cope with that, it’s free money!

Flash the Cash Example

Get the Halifax All in One credit card (www.Halifax.co.uk) which is offering 0% on purchases for 10 months and open an Alliance and Leicester eSaver account (www.alliance-leicester.co.uk) which pays 6.60% interest AER and pays interest monthly. At the beginning of each month, for nine months, transfer your monthly spend from your current account to your savings account and the put all purchases on your Halifax card – don’t forget to make the minimum monthly repayments. On the tenth month, transfer your cash back from your eSaver to your current account and pay off your credit card in full. If your monthly spend is £1,000 and you are a basic rate taxpayer then you will have made £153 in interest.

Complete guide to 0% purchases credit cards >>>

Compare 0% purchases credit cards >>>

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The 0% balance transfer trick

Since Egg introduced the first 0% balance transfers card on Christmas day, 2000, people have been making hundreds of pounds by balance transferring their credit to savings accounts and reeling in the interest. Credit card companies have become aware of this trick and have made it more difficult by introducing “handling fees”, but it can still be profitable. Known as “stoozing”, this scheme is complex and should only be attempted if you are very confident with your finances.

The trick basically has five steps:

Get a credit card that offers a long 0% balance transfer period and allows you to pay off overdrafts.
“Balance transfer” the cash to your current account. Of course, you don’t have an overdraft so this cash will put you further in credit.
Now transfer this cash into a high interest savings account.
Make minimum repayments on your credit card every month.
Just before the 0% balance transfer deal ends, transfer the cash from you savings account to your current account and then pay off your credit card completely.

If you choose the right card and the right savings account, the amount you will make in interest will outweigh the amount you have paid in handling fees.

Flash the Cash Example

Get a Virgin credit card (www.virgin.com) which offers 0% on balance transfers for 15 months and that allows you to pay off an overdraft and open an Alliance and Leicester eSaver account (www.alliance-leicester.co.uk) which pays 6.60% interest AER and pays interest monthly. Balance transfer your credit limit, from your Virgin card to your current account then swiftly move this into the eSaver account, Virgin will charge you 2.98% in handling fees. Remember to make your monthly repayments and before the 0% balance transfer period ends, transfer the cash back to your current account and pay off your card in full. If you transferred £5,000 and left it in the eSaver for 12 months, you would have earned £330 (minus tax) which, take away the handling fees of £149, would leave you £115 in profit if you are a basic rate taxpayer.

Complete guide to 0% balance transfer credit cards >>>

Compare 0% balance transfer credit cards >>>

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Dos and don’ts

Don’t apply too frequently - Every time you apply for a credit card it will have an effect on your credit score. If you apply for lots of cards in a short period of time you will look desperate and thus unattractive to credit card companies, so space you applications out. Also most deals are only available to new customers, so you can’t get credit cards from the same company too frequently. Typically, you will have to wait 12 to 24 months after closing your account with a specific company for them to consider you a new customer again.

If you have a poor credit history compare adverse credit cards

Don’t spend more - It can be easier to spend when you are paying by credit card rather than cash, because it doesn’t feel like “real money” but don’t let it make you spend more. Just because you have available credit, doesn’t mean you should spend it.
Don’t do spending and balance transfers together - Most credit cards will use a payment hierarchy which means your repayments will be allocated to the cheapest debt first (i.e. the 0% balance transfer), this means your expensive purchase debts will become trapped, continuing to accumulate interest until all other debts are cleared - this will make them very expensive indeed.
Do set reminders - Whether you leave a note in your diary, on your computer or in your phone, setting reminders of when your credit card deals run out should help you to remember to pay them off and avoid charges.
Do plan ahead - It is unwise to apply for money making credit cards if you will need to apply for credit elsewhere soon, for example for a loan or mortgage. Also remember to cancel your old credit cards – even if you don’t have any outstanding debt on them they will count as “available credit” and may affect your credit score.
Do spread it around - There are only so many card issuers, so if you are planning to make money for credit cards, it’s best to spread it around a bit. Be aware that you cannot transfer balances between cards backed by the same provider. Unfortunately, who provides the cards is not always as obvious as you might think and may require some research. For example, MBNA issues its own cards but it also backs many more cards including Virgin and Alliance and Leicester cards. It is always important to establish who the credit provider is for the card deal you are assessing.
Do remember the benefits - As well as the rewards outlined above, there are added advantages of spending on your credit card, including purchase protection. If you spend on your credit card, you legally get ‘Section 75’ consumer protection. This means any item you buy that costs over £100, providing some of it is paid for on your credit card, the card company is equally liable with the retailer if anything goes wrong, thus you can request a refund from your credit card company. Furthermore, Consumer Credit Act places statutory restriction of £50 on your liability if your credit card is lost or stolen.

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Recommendations

These money making recipes will only work if you are financially disciplined and have control of your spending. If you are good at managing your money then by all means make the most of it, start reaping the rewards!

Cashback cards are probably the easiest to profit from. They should be relatively straightforward to manage and as long as you pay off your balance every month, there’s nothing to stop you making plenty of extra cash with these.

Reward and Airmiles card are great if the incentives you are collecting for are things you want and even if they aren’t, you can always flog them on ebay!

Complex money-moving schemes like the 0% balance transfer trick should only be attempted by the most confident money managers.

If you have made money from your credit card do let us know. Share tips and experiences in the forum and start the money making revolution today!

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