Introduction

• I was inspired to write this blog after I did my annual review of investments in 2015 and found out the best return on investment I got in 2015 was from my credit card! Admittedly this does say a lot about the state of the stock market in 2015, but it definitely doesn’t explain the full story.
• We are living in a world of unprecedented low interest rates, hitting the 7th year of 0.5% interest rates in the UK and the stock market remains extremely violate, therefore savers have to work harder and harder to earn a return on their money.
• The aim of this piece is threefold; (1) to show how I have been able to use  my credit card as a source of income generation (2) to suggest what I see as the best credit cards currently available  (3) my golden rules for how to use  a credit card sensibly and optimally
• It’s important to highlight that not everyone will be able to make money from their credit cards. When using a credit card you have to spend money to save it! I travel with work once or twice a month, generating around £700 of expenses which go onto my credit card but are then re-reimbursed by my company.
• Just because you’re not having those kinds of expenses reimbursed (i.e. you have to spend money to ‘earn’ it back as reward on the card) doesn’t mean that carefully choosing the credit card you use isn’t an important consideration – it really is. It is also imperative to highlight that I am focusing on ‘reward’ based cards only.

Using Credit Card to Earn Money 

• The credit card I use is the American Express Platinum Cashback Credit Card.
• The key benefits of my Platinum Amex Card are:

• 5% cashback during first three months on up to £2,500 in purchases
• After the introductory period you’ll receive 1.25% cashback on virtually everything you buy – not just for a limited period.
• 2.5% cashback in the first month of every year if you spend more than £10,001 in your previous 12 months of card membership.
• Travel Accident Insurance up to £150,000 on public transport when you buy your ticket with your card.

• Receiving the above isn’t free however, I pay an annual fee of £25. There are also some key eligibility criteria to be aware of:

• You must be aged 18 or over
• You must have a current UK bank or building society account
• You must have a permanent UK home address
• You must have a household income of at least £20,000
• You must have no history of bad debt

• I opened my account in 2015 and in the first 3 months I earned almost £200 in cashback. That’s a monthly return of £67. Given the current condition of the stock market, I haven’t been seeing that level of return anywhere else.
• While it has been excellent for me, there are a couple of key things to consider if you are wondering if you should choose this credit card. Firstly, you have to be putting a sizeable amount on the card each month. At a cost of £25 if you’re not using the card enough it’ll cost you more than you’re earning from it. Secondly, I won’t be averaging £67 a month going forward, that does include a large amount of time when I was receiving 5% cashback as part of the introductory offer.

 

Best Credit Cards Options Available Right Now 

• If you’re planning to get a credit card for the first time, or need to change your card, but the Amex Platinum Card is not for you then there are a number of alterative options. Here are the best I currently see on the market:
• Halifax – Those with a Halifax current account should consider the Halifax Rewards Clarity credit card which gives £5 a month cashback for every month you spend £300 on the card. To be eligible for the card, you either need to hold or switch to a Halifax current account and pay at least £1,000 a month into it. It’s also worth highlighting that switching to a Halifax current account will net you a one-off £125 bonus.
• Supermarket Credit Cards – If you always use the same supermarket for your shopping then a Supermarket Credit Card is a good option. The two main competitors vying for the top spot are the Tesco Clubcard Credit Card and the Sainsburys Nectar Credit Card.
• Tesco – Earn 1 Clubcard point for every £8 spent, or 1 point per £4 if shopping in Tesco (plus the 1 point per £1 you get with a standard Clubcard). One point is worth 1p if spent instore at Tesco, but boosts to up to 4p if redeemed for some of Tesco’s special Clubcard Rewards vouchers. These can be used for a huge array of mainly entertainment-based treats.
• Sainsbury’s – If you prefer to shop at Sainsbury’s then the Nectar Bonus credit card gives you a boost on the Nectar points you earn when shopping there. New customers applying by 24 May 2016 will get a boosted 4 points per £1 spent on Sainsbury’s shopping and fuel for the first three months. This is capped at a £1,000 spend per month. You will get two Nectar points for every £1 you spend in Sainsbury’s, or one Nectar point for every £5 elsewhere. You can redeem the points with other retailers in the Nectar scheme, such as Pizza Express, Argos, eBay, Eurostar and more – and in some cases the point value increases.
• Above are the three best alternatives to the Amex Platinum Credit Card I see right now. However, this will obviously change over-time, so you should always ensure you do your research before moving.

 

Golden Rules when Using a Credit Card 

• I see 4 simple golden rules to follow when using a Credit Card. While these are personal to me, I believe they’re universally important and I’ve been stung by not doing some of these in the past.
  • Only ever use 1 Credit Card. I have 2 Credit Cards but only ever use one, my Platinum Amex. The other is a credit card linked to my Current Account but I almost never use it. It is my emergency card, mainly for if I am purchasing a high value item and the store doesn’t accept Amex.
  • Always set up a direct debit to repay the card in full each month. This piece is focused on ‘reward’ cards and I personally believe you should only get a Credit Card if you can afford one. Interest repayments – which you’ll face if you don’t pay full amount off each month – will murder any rewards you might be expecting. If you aren’t sure you can always repay the card in full, then DON’T pick a card for rewards. If you are in this position you should be focussing on finding a card with a lower interest rate instead.
  • Extra Protection when using Credit Card. I always use a credit card when purchasing big ticket items, this is because of the additional protection you get over Debit Card. This is all thanks to Section 75 of the Consumer Credit Act 1974. Fundamentally, if you purchase an item costing over £100, either in UK or abroad, and pay on a credit card, the card issuer’s equally liable if something goes wrong, this means extra protection for you!
  • Always check your statement. It is worrying how easy it is for an individual to steal your details and purchase something on your card. All they need is your card number & CVC number (number on back of card). Because of this you should always check your statement each month. This will also highlight how much you are spending and show any potential areas for you to optimise your spending behaviour. Another tip to help prevent fraud is to memorise your CVC number and then scratch it off your card, this makes it much harder for individuals to steal your card and use it online.

 

Conclusion 

• I hope to have provided enough detail for you to be able to make a decision about whether or not a ‘rewards’ credit card could work for you. Whilst an additional £10 – £70 a month is not going to mean you can give up working completely, it adds up quickly, and can be a nice small source of income to top-up savings or buy a desired gift.

Photo Credit: https://www.flickr.com/photos/59937401@N07/5856793551/