The six golden rules For Best Choice Credit Cards
Reward cards can be a great way of earning £100s’ worth of bonuses, just for doing your everyday spending. It sounds great – everyone loves something for nothing. But unless you’re careful, cards will actually deliver nothing for something, as there are a couple of major holes to watch for. Here are the golden rules to get the best from them…
- Set up a direct debit to repay in full each month so you’ll never pay interest, which will dwarf the gain Getting charged interest almost always scuppers even the very best reward schemes, so quite simply…If you want rewards, always set up a direct debit to repay the card in full each month, so there’s NO interest. Sadly, some card providers deliberately miss the ‘repay in full’ option off their direct debit forms. If so, just write ‘pay off in full‘ and send it in. It should be honored, but call and check to be safe. If you’re not sure you can always repay the card in full, DON’T pick a card for rewards. Focus on a card with a lower interest rate instead – see our 0% Credit Cards guide.
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Use the card for all NORMAL spending to max rewards Once you’ve set up a credit card, every time you use it you get paid. While this isn’t an excuse to spend more, it does mean from now on…Use the rewards card for ALL normal spending, replacing cash, cheques and other debit, credit and charge cards.For those who have work expenses they need to reclaim, this can be a powerful way to earn more, at no cost to you, provided you can cope with paying the bill in full each month. Do check it’s fine with your employer though, as there’s a chance it could be seen as a taxable benefit (you’ll still be up even if it is).
- Check the rewards are right for you Some schemes are focused on making people think they’re earning large, when actually payouts are pretty paltry, so go through our best buys below meticulously to check which you’ll actually get value from. To what extent depends on the type of scheme.
- Rewards schemes Here you earn days out, flights, holidays and more by getting points – and that’s where the problems start, as Martin points out…“For a TV programme stunt I was once asked to design a credit card that looked good, but contained hidden, abysmally anti-consumer traps. Many signed up to my fake MACS card (SCAM backwards), which promised TWELVE points per pound spent.
- “Most people didn’t ask what the points were worth. In fact, they were worth 0.0001p. In other words, nothing. And 12 nothings… is nothing. “It’s this lack of transparency that allows reward schemes to create a magical ‘something for nothing’ mystique. A Sainsbury’s Nectar point is worth up to 1p compared to a Tesco Clubcard point worth up to 4p, so one Clubcard point is worth almost four times more than a Nectar point. “That’s what this guide focuses on: a mathematical evaluation of every scheme to pick the real winners.”
- Cashback or ‘close to cashback’ cards With cashback cards you earn cash each time you spend, and it’s then usually paid once a year as a lump sum (see our Top Cashback Cards guide). The main advantages are that you know exactly what you’re getting and can spend the rewards anywhere.‘Close to cashback’ schemes are where money earned can be converted into gift vouchers or can only be spent in a specific shop, eg, M&S. They’re great if you’ll use them, useless if you won’t.
- Use our eligibility calculator before applying for a speedy check of which cards you’re most likely to get – and protect your credit score Usually, the only way to know if you’ll be accepted for a card is to apply, but each application marks your credit file. But our Reward Credit Card Eligibility Calculator quickly shows your odds of getting almost every top reward card so you can find the ones most likely to accept you, thus minimizing applications. Quick questions How does the eligibility calculator work? Will credit scoring affect the deal I get and my credit limit?
- Or join our Credit Club for a full credit health check, including your free Experian Credit Report, Affordability Score and Credit Hit Rate The new MSE Credit Club is a game-changer. For years the credit market has been shrouded in mystery but our revolutionary tool brings together the key components to give you the full picture, and crucially, what it means for your acceptance chances and how to boost your credit worthiness. A credit score alone isn’t enough to borrow, as there are other factors at play (it’s why many with perfect scores still get rejected). Credit Club shows you…1. Free Experian Credit Report – your credit accounts & how you’ve managed them.
2. Free Experian Credit Score – how lenders rate your past credit behavior.
3. MSE Affordability Score – how lenders assess if you can afford a product.
4. Your Credit Hit Rate – how likely you actually are to be accepted when you apply.
5. Credit Card & Loan Eligibility Calcs – what your odds are of getting specific top deals.
6. How to improve your credit profile – we show where your profile’s strong and weak, & how to improve it. - Boost the value of your points By correctly targeting the right rewards to redeem your points on, it is possible to substantially increase the amount. To find out how to do this for all schemes and specific info for Nectar, Avios and Tesco, read the Boost Your Loyalty Points, Avios Boosting Tricks guides.