Do it right and your credit card will pay. You spend and it can give you; extra protection, dole out freebies, extend your warranty, ID fraud protection, extra discounts and more. In fact without doubt they are the very best way to spend.
In this guide
Don't confuse credit cards with debt
This guide will take you through the top 10 tips for maximising the way you use your credit card. It's simply a way to pay for goods, yet credit cards give an optional borrowing facility. And it's this optional extra that's the problem not the card itself. Don't get me wrong, plastic's sometimes pernicious and has ruined many lives. Cards are like fire, used right, a fantastic tool. Used badly, you'll get burnt.
So for those susceptible to temptation if they've got plastic, or are already struggling, steering well clear is the correct cautious approach (or use the Best Balance Transfers guide for how to cut existing cards costs or the Credit Card Shuffle guide for how to do it without new credit).
Though you must remember the golden rule...
Always set up a direct debit to repay the balance in full each month, otherwise the interest you'll be charged will outweigh the benefits.
For anyone prepared to strictly follow the right recipe, plastic can be fantastic. Here's ten tips:
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Get free flights or spending vouchers.
To bribe you to sign up, many cards dole out freebies as soon as you spend a trigger amount on them. So sign up do your normal spending on the card until you hit the trigger, ensuring you ALWAYS repay in full so there's no interest, then wait for the freebie – and you needn't bother using the card again. The freebies available can be vast, typical deals include the BMI Amex card, where provided you do £250 of your normal spending on it within 90 days, and you get enough BMI miles for a return business-class flight to Russia, Turkey, Majorca and more. The card has a 16.9% representative APR (Official APR Example).
Yet don't just grab this, before you make a decision read the full Credit Card Freebies guide; there's up to £90 of high street vouchers and much more. Or see the Airline Credit Cards guide for the top frequent flyer cards.
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Get free extended warranties
Most electrical goods include a free year long warranty – so if the product breaks down you can get it repaired at no cost. However they also try to sell you ‘extended warranties' to last for extra years at a vastly increased cost.
However, one credit card gives you an automatic extra year's extended warranty on electrical goods provided you use it to pay. Of course do ensure you pay it off IN FULL at the end of the month or you'll be charged interest.
- The Ulster Gold Mastercard (16.9% representative APR - Official APR Example) gives an extra year's cover for after the manufacturer's one or two year guarantee expires. Register up to six appliances per year. To qualify for cover, registrations must be made within 90 days of purchase and for appliances costing between £75 and £2,000, check for exclusions.
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It's the cheapest way to spend abroad
Want the best currency rate everytime you're abroad, then spend on the RIGHT credit cards, and it's cheaper than even the best bureaux de change. Often you can be up to 6% better off using the right card.
The top card is the Halifax Clarity which, unlike most cards, doesn't add a hidden commission to the exchange rate and has no ATM withdrawal fee. So pop it in your wallet just for holidays but ALWAYS repay in full to minimise interest – if not the interest cost dwarves any gain from the foreign currency use. It has a 12.9% representative APR (Official APR Example).
Don't assume all cards are cheap though, most are hideous, to check yours and see a full explanation go to the full Cheap Travel Spending guide.
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Get protection if the company you buy from goes bust.
Buy something costing over £100 on a credit (NOT debit) card, and under the section 75 law your lender is jointly liable with the retailer. If the company goes kaput and you can't contact it about problems or any other issue, you have exactly the same consumer rights with the card company as you do with the retailer to get money back or compensation.
This applies even if you only pay a deposit on the card. Buy a £3,000 TV and pay just 10p on the credit card and, they'll hate us for telling you, the card company's liable for the whole £3,000.
So if you're ordering an expensive product do it on a credit card for safety, though of course ALWAYS pay it off in full to avoid interest. For more info including what counts as ‘spending £100' and how to make a claim see the full Section 75 & Visa Chargeback guide.
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Purchase protection
Many credit cards offer a ‘purchase protection' system, meaning if you buy goods on the card and it is lost or stolen within a set time – usually around 90 days – you can get the money back from the credit card company.
This isn't the biggest deal, though coupled with the more important section 75 legal protection explained it's useful. For most people it's not worth a new card application to get one of these, but be aware which of your cards have it, and if something goes wrong know you can reclaim.
Martin's Story – a double claim...
A few years ago I had my one month old bike stolen. So having been to the shop to buy a new one to get to work, I cycled to the police station to get a crime number so I could claim on my purchase protection. This second bike, which was chained to the cop shop railings and D-locked round the wheels, was stolen too. So I walked straight back inside, reported that too – and thankfully it paid out twice.
| Card | Protection | Other spending benefits |
| Amex Platinum* | Up to 90 days, £2,500 per item | 2.5% intro cashback then 1.25% |
| Barclaycard Platinum Simplicity Visa* | Up to 90 days, £5,000 per item (delivered purchases) | Low rate for purchases |
| British Airways Amex Card* | Up to 90 days, £2,500 per item | Collect airmiles |
| BMI Amex | None | Free return flight |
| Capital One Classic Visa* | Up to 100 days, £1,000 per item (£25 excess) | ID Fraud protection |
| Capital One Bank World Mastercard* | Up to 100 days, £1,000 per item (£25 excess) | ID Fraud protection & 5 % intro cashback, (19.9% rep APR) |
| HSBC* | None | None |
| Lloyds Airmiles Duo* | None | Free return flight |
| Nationwide's* | No longer offers it to new customers | Overseas spending |
| Natwest* / RBS* | None | None |
| Santander Zero | None | Overseas spending |
| The Nectar Amex* | Up to 90 days, £2,500 per item | Intro points offer & collect points |
| Ulster Gold Mastercard | Up to 100 days, £3,500 per claim | Extended warranty |
| Virgin* | None | Credit card loan |
| Correct as at Feb 2011 | ||
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Use it to boost your credit score.
Those with poor credit histories can boost them by using a credit card to demonstrate responsibility.
Of course getting a card isn't easy if you have a poor credit score – so you need to apply for special ‘easy to get' cards which normally come with hideous 30% plus interest rates.
Yet this isn't a problem as all you need do is spend a little each month, and set up a Direct Debit to fully repay each month so it's INTEREST FREE then after a year, your credit history should be bolstered. For a full list of cards and how this works see the Best Bad Credit Cards guide.
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Stooze for free cash.
For the super-savvy debt-free, you can make £100s for free from credit cards as they'll lend you cash at 0%, so stick it in a top savings and earn 3% on it. There's even a word for this…Stoozers.
The easiest way is to bag a card which has a 0% deal for spending on, use it for normal expenditure, then save the unused money building in your bank account. For full instructions and which cards to use see the full Stoozing guide.
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Free ID fraud protection.If you get any Capital One* credit card, it comes with free ID fraud protection, most importantly this doesn't just apply to their products, but everything you have – whether you use the card or not.
So just getting the card means you get some of the extra protection – of course if you spend without paying off in full though you will pay interest.
The protection involves two free credit checks each year and an ID fraud helpline to call if needed. See the full Free ID fraud protection guide for full info.
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Use it to get loans cheaper than the cheapest loans
So you need a loan – what's the cheapest way? A credit card. After all the cheapest credit cards are cheaper than the cheapest loans (borrow less than £2,000 and you pay 18%). The difficulty is replicating the ‘ready cash' function of a loan.
A few cards have a special facility that lets new cardholders pay cash into your bank account which you can use as a loan, leaving you owing the card the money.
These include the Virgin* card which is 0% for 20 months with a 4% fee (it's 20.9% representative APR after Official APR Example) so if you can repay in that time it's a winner.
The one warning is that while loans have repayments over a fixed time, with credit cards you repay what you like above the minimum – so to truly replicate a loan's enforced discipline, set a repayment to clear debts in a fixed time, e.g. 3 years, and set up a direct debit. For a full step-by-step guide see the Cheap Credit Card Loans guide.
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Get paid to spend on ‘em.
Far too many people have credit cards, repay them in full and think they're doing well as it doesn't cost them. WRONG. Some credit cards pay you cash each time you spend on them.
Meaning do all normal spending on them and you can earn £100s a year – just ensure you've a direct debit to repay in full each month so it's interest free.
Current top-payer Capital One World Mastercard* pays 5% cashback for three months, then up to 1.25%. If you don't pay it off in full it has a 19.9% representative APR (Official APR Example).
For a full list of alternatives see the Top Cashback Cards guide. Alternatively, grab credit-card rewards schemes like Nectar points or Airmiles, see the ranking in the Best Credit Card Rewards guide.
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Great if you're locked out…
Here's one more tip for free...never had the knack myself, but I'm told you can squeeze a card through the gap in your door to let yourself back in.
Think before adding the 'insurance'
Payment protection insurance is commonly sold with credit cards - the idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).
There have been a myriad of cases where it has been missold eg, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined.
The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.
Always be vigilant to check you aren't getting more than you bargained for when you fill in the application, then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.
The impact on your credit score
To bag every benefit possible you'd need to enough plastic to do facial reconstruction on a Hollywood star, yet it's important to be careful and think about the impact on your credit score.
Every time you apply for credit it has an impact on your credit score – and thus your ability to get further new credit (see the Credit Rating guide). Yet if you've got a good credit history there's no need to be unduly worried – if you don't be wary and always concentrate on using your credit score to cut your interest costs (see Best Balance Transfers).
There are no hard and fast rules, but many have successfully had up to ten cards without problem.
- It's not how many, but how often that counts.
Lots of applications in a short space of time will shoot down your credit score; the overall number of applications is less important than the frequency.
Therefore if you're grabbing multiple cards for different purposes after the first couple of applications, spread others out every few months. Other factors that count include total debts, repayment history and income. 
Cancel old unused cards
Once you've decided you're not going to use a card any more, ensure you cancel it. That means actually calling up the card company and requesting the account is closed, not just cutting the card up. This is because having high available credit can diminish your credit score, not just the amount of outstanding debt.- Focus and pick multi-use cards
Ensure your card arsenal is correctly packed by first examining the benefits that your existing cards offer – if you have any. Then don't duplicate just to get a mildly longer purchase protection for example. Some cards can cover a number of bases.
