Should I opt for a credit card that offers benefits?
Print View - Published: Fri, 26 Mar 2010 at 10:46 PM
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QUESTION: If I pay off the balance on my credit card every month, which cards offer benefits and what are they?
ANSWER: During the 90s, people using credit was often seen as a sign of economic stress, as people used credit cards as long term flexible loans, paying off only the minimum each month. However, in recent years, there has been an increase in the number of credit cards holders paying their balance off in full each month.
For people who pay off their card in full, cashback or rewards cards are an ideal way to get something back on your everyday spend.Of the many cards on offer at the moment, American Express offers the strongest reward package, however it's worth bearing in mind that AMEX is still not as widely accepted a credit card as say Visa or MasterCard.
So if a fair chunk of your credit card spending is to be done at the corner shop, you may want to consider a Visa card instead. That said, most of the major retail chains accept Amex, so if you use your credit card mostly at high street shops, then Amex is probably right for you.
As the name suggests, cashback cards offer a certain percentage of the transaction value back as cash. This is a good reward, as cash can clearly be spent anywhere, unlike points, but there are less cashback cards on offer compared to rewards cards.
Rewards/points cards offer different deals, often depending on the issuer (i.e. airline cards offer airmiles, supermarket cards offer shopping rewards) - it is down to the individual to decide which rewards are most applicable to them.
If airmiles are your thing, the BMI American Express card from MBNA, available through confused.com, offers a bonus 20,000 airmiles if at least £250 is spent in the first 90 days, and 1.5 airmiles per £1 spent overall. Therefore, if you spend £250 a month on your card, after a year, you would have nearly 25,000 airmiles!
Whichever card you choose, it is important to remember that these cards only give a net benefit if you are strict in paying off the full balance each month - otherwise the interest paid will eliminate any benefit. Setting up a direct debit can be the best way to ensure you get the rewards you are looking for.
So to summarise:
· Always pay off the balance in full
· Pick the rewards most useful to you
· Amex provide good rewards but check you can use it in the stores you spend most
About the Author
Read more about credit cards at http://www.confused.com
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