Credit Card Guide

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Do you fancy a free flight, free CDs or some free cash? Then check out our round-up of the best reward credit cards on the market… (updated 22/03/10)

We could all do with a bit of extra cash at the moment, and if you are good at managing your finances you could get just that, simply by using a credit card.

While many people associate credit cards with debt, if you are disciplined with your money you could actually get free cash and other rewards from credit cards without paying a penny of interest!

It’s essential that you follow the rules and always pay off your credit card bill in full at the end of every month, but if you can do this, our guide could help you earn real money for nothing…

• Health warning
• The best cashback credit card
• The best airmiles credit cards
• The best supermarket credit card
• The best other reward credit card
• Our recommendation

Health warning

The credit cards highlighted in this guide are not for those who need to borrow money – you should see our guide to 0% purchases cards and article, do you really need a loan?

If you have any outstanding debts then these cards are also not for you – you should stop reading now and check out our guides to 0% balance transfer cards and lifetime balance transfer cards.

If however, you are debt-free and well-organised with your money, if you always open and pay your bills and statements as soon as they arrive and are disciplined with your spending, these cards could be perfect for you!

If this is you and you are good at managing your finances then why not make the most of this skill and start making money from credit cards?

Before you choose one of these cards, you must be sure that you will be able to pay off your credit card balance in full at the end of every month – if you pay interest on these credit cards then the cost of this is likely to outweigh any benefits you may receive.

If you have any doubt you’ll be able to do this, cut your losses and give up now. But if you know you can do this – it’s time to start earning cash and rewards!

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The best cashback credit card

Cashback credit cards are very straightforward – they simply give you back a percentage of what you spend on your card. 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. Many also offer very generous introductory offers.

One of the best cashback cards on the market at the moment is the American Express Platinum credit card (www.americanexpress.com). It offers a massive 5% cashback for your first three months (up to £100), followed by tiered rates up to 1.5%. If your monthly spend is £1,000 you would receive a massive £202.50 of free money at the end of the first year!

Barclaycard (www.barclaycard.co.uk ) has launched its new Freedom scheme, that bridges the gap between cashback and reward points.

Users earn 1% cashback in participating stores, which can be spent in any retailer signed up to the Freedom scheme.

Complete guide to cashback credit cards >>>

Compare cashback credit cards >>>

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The best airmiles credit cards

Airmiles credit cards allow you to collect airmiles every time you spend, which can then be exchanged for free flights and sometimes even 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.

Current airmiles offers include the following:

The British Airways American Express card (www.americanexpress.com) – On the Premium Plus Credit Card (46.0% APR) you can earn 1.5 BA miles per £1 spent and 3 BA miles for each £1 spent on BA flights and holidays, plus a 6,000 bonus when you first use the card. The British Airways American Express Credit Card offers 1000 BA miles if you spend £500 in the first three months, then one mile per £1 on all purchases. Spend £1,000 a month and in a year you will have earned 13,000 miles – enough to fly to a selection of European destinations including Germany, Switzerland, France or Belgium.

The Virgin Atlantic credit card (www.virgin-atlantic.com) – The White Card at 17.9% APR offers 3,000 bonus Flying Club miles and 1 Flying Club mile per £1 spent, while the Black Card at 37.1% offers a 6,000 point bonus on the first purchase and 2 club miles per £1 spent. The current offer allows you to earn 3,000 Flying Club miles on your first spend followed by two miles for every £1 spent with Virgin Atlantic or Virgin Holidays and one mile per £1 for all other purchases. You’ll need to collect a fair few miles to get free flights though – you’ll need 40,000 to get an economy round trip for two to selected bmi European destinations, according to the website. You will however, get a free companion round trip flight if you spend £15,000 or more a year on your card and book a qualifying flight with Virgin Atlantic.

Further cards include the BMI American Express, Lufthansa’s Miles & More Credit Cards, and the Ryanair Credit Card, which offers a free return flight if you spend £100 in the first 90 days.

It’s worth noting that 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

Airmiles calculator

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The best supermarket credit card

Supermarket credit cards generally allow you to collect points as you spend, which can be exchanged for a wide variety of treats and rewards.

One of the most popular is the Sainsbury’s credit card (www.sainsburysbank.co.uk) which allows you to collect two Nectar points for every £1 you spend on Sainsbury’s shopping in the first two years, in addition to points earned on your Nectar card. Plus you will earn one point for every £5 spent elsewhere. If your monthly spend is £1,000 and includes £400 at Sainsbury’s, you would earn 11,040 points in a year. Nectar points can be exchanged for a huge variety of rewards (see the full selection here) – for example 10,000 points could get you a JVC DVD player, 15,000 points could get you 12 bottles of wine and for 42,200 points you could get an 8GB iPod Nano AND Dock.

Complete guide to supermarket credit cards

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The best other reward credit card

One other reward card that is definitely worth a mention is the Sony credit card (www.sonycard.com) which has a fantastic introductory offer. Basically, if you make any purchase within the first 90 days of having one of these cards, you will receive 4,000 reward “pulsebeats” which can be exchanged for a variety of Sony products - 4,000 beats will get you up to two free DVDs or CDS or a PlayStation 2 game. You will then receive one “pulsebeat” per pound for all purchases thereafter and triple beats on Sony purchases.

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Recommendation

These credit cards all offer great opportunities to earn money or rewards for nothing but to make sure you benefit, follow our top tips:

• Pay off your balance in full at the end of every month – The importance of doing this cannot be stressed enough – you will only benefit from these cards if you avoid paying any interest on them.
• Don’t apply for lots of credit cards at once – This could be damaging to your credit rating and may make you look desperate. The cards offering the best rewards are likely to have the most stringent eligibility criteria so to improve your chances make sure you read our top tips to avoid being turned down for a credit card before you apply.
• 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 as they will count as “available credit” and may affect your credit score.
• 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.

For other tricks to make money from your credit card, including making money from your existing card and working the 0% balance transfer trick, see our guide to money for nothing from your credit card.