For first time customers, choosing a credit card can be a very daunting prospect. Try to navigate your way through the online system of offers and rewards and you’re likely to become confused by a multitude of cards offering different services and benefits. In a market saturated with opportunities to borrow money quickly, credit card companies have been devising new ways to hook prospective customers, with the latest cards offering cash incentives, meaning you earn money each time you make a purchase.

One example of this offer is the Aspire® World card from Capital One, which offers 5% cash back on all purchases made within the first 3 months, but with a cap of £100. To get the maximum amount of cash back, you would have to spend £2,000 in three months, but the interest rate attached to the card means you may end up having to pay back six times the amount you receive from the cash back scheme anyway.

Although the percentage is quite high, it’s worth keeping in mind that it’s for a limited time only – after the initial three months, the cash back rate drops to a mere 0.5% on all subsequent purchases. It’s not an immediate incentive either – accumulated cash is paid back into the account every January, meaning consumers could be waiting up to a year to see any money and there is always a high possibility that any cash back earned will simply be used to pay off incurred charges or interest.

Customers who pay off their monthly bills in full and on time, however, could benefit from this type of offer, as they tend to avoid the higher interest rates and additional charges.

The problem with these short term cash injections, whether they are from credit cards or loan advertisements on the television, is that people tend to forget that they eventually have to pay back more than they’ve borrowed, which begs the question: if you don’t have enough money now, how sure are you that you’ll have it in the future?

These days, it takes longer to heat up a Rustlers burger in the microwave than to apply for a credit card online, so it’s essential to think logically about what the card offers and how it will benefit you in the long run. If you are fairly sure that you’ll able to pay back the monthly sum, a card with a cash incentive could be a good option for you.

However, consumers influenced by the prospect of receiving a cash bonus without thinking further down the line may end up shocked with the results, particularly if they’ve never really dabbled with debt before. Though the lenders appear to be doing you a favour, most of these incentives are generally in their best interests, so just remember, by the time you’re credit card savvy, you may have already racked up masses of debt, so what good is £200 at the end of the year if it’s just going to go back into the bank’s coffers?

	Written by :
	Jemma is a news & research reporter for compareandsave.com.Having worked as a journalist on a number of personal finance websites; she now spends time researching and commenting on UK personal finance stories and investigating new ways to help our readers save money.For press enquiries, please visit our Media Centre page.

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As we stare into the precipice of double-dip recession you’d be forgiven for thinking, from the endless pessimistic headlines, that we about to enter an economic dark-age the like of which we have never seen before.

It is true that getting credit (on sensible terms) is proving ever more difficult for those with a bad history of credit management, but if you’ve been a ‘goody-two-shoes’ your options have never been better (I still find it crazy that I can borrow on better terms than Italy! ) Those with impeccable credit histories can now expect deals of close to 2 years for balance transfers (roughly 5 or 6 months better than the best deals we saw in the lead up to the crash). If that doesn’t suit your desire to spend and pay down you can now get combined balance transfer & purchase cards for up to 15 months (I remember when we thought 9 months was fantastic).

“…all vying to give us cash for spending with them!”

For those who just want to spend and need further tempting more and more credit card issuers are offering cash back. American Express, Capital One, Santander and others are all vying to give us cash for spending with them! No, you’ll be surprised to hear, they’re not doing this from the goodness of their Banking hearts. The credit card platforms you use for buying your goods with (Visa, MasterCard, American Express etc) all charge retailers (or more specifically the retailer’s bank) a percentage fee for right to use their platform for the shopping you have bought.

This is called an “interchange fee” and although many retailers argue that it is too high, and potentially anti-competitive, it exists (and won’t go any time soon). The actual interchange amount differs by card platform and by the retailer you are buying, but every time you make a purchase an interchange occurs. How do the retailers afford this? No prizes for guessing…but yes, you’re already paying for it!

If you use cash, debit card or a credit card without rewards you are effectively subsidising those who are claiming back interchange funded rewards. So what do you have do you get hands on this? Get a rewards card of some kind. A number of different types exist. Airmiles (like BA Avios), Points (like Nectar or Tesco Clubcard), but possibly the most transparent and easy to understand is cash back and is a market that’s alive at the moment with issuer activity.

American Express (because of the high interchange they charge retailers) have always been the leaders in this space, but last autumn we saw Capital One and Santander challenge for a slice of the market. Given that they both use MasterCard to process their payments this was a bit of a surprise. MasterCard don’t have get the interchange to challenge American Express like for like on percentage cash back (they reduced theirs whilst they were under investigation from the Office for Fair Trading), but they did have one trump card they could play – People’s understanding of American Express. MasterCard may not pay back so much, but everyone knows it is very widely accepted.

American Express tends to live in the mind of customers as a premium brand that is not widely accepted outside of big cities. It’s a brand that is so exclusive it has its own invitation only credit card (the American Express Centurion) without a credit limit – Yes, you could buy a house on it!

In Autumn 2011, Santander launched their 1-2-3 card , whilst Capital One went live with a 5% cash back card (Capital One World) in a head to head move no-doubt designed to antagonise American Express . Not wanting to lose their cash back crown American Express responded by upping their game. They revamped their cash back card to offer 2.5% for the first 3 months and 1.25% after that. On almost every measure this card was better for customers over the course of a year than the Capital One World, but it seems the good folk at American Express had overestimated the British public. Yes, it was a better credit card for most people, but to know this we’d have to read the small print and that isn’t something we are good at. On the face of it, at 5% cash back, the Capital World looked like the strongest product around.

Of course, the thing with cash back is that is really doesn’t matter what percentage you offer to hook people because it’s capped. 50% cash back sounds great, but if it’s capped at £50 then you’ll only ever get £25. This is where the 1-2-3 Card falls down too – with its £300 cap on fuel (so you’ll only ever get £9 per month).

Not to stay down for long American Express have already re-responded and the great news for consumers is that they have matched the Capital One 5% intro period with their Platinum Cashback….actually it’s slightly better even than that. Both Capital One and American Express cap the 5% cash back for the first 3 months at £100, but with Capital One you can’t earn any more in the first 3 months once you’ve spent your first £2000. With American Express you continue to earn at 1.25% once you’ve maxed out your 5% cap at £100. Yes there’s still fee of £25 which is annoying, but given that it still offers an ongoing 1.25% cash back, versus the tiered Capital One cash back which up to £6000 annual spend remains at 0.5%, it’s a great card!

And what of the usual ‘issue’ with American Express – that is, that it isn’t accepted in enough places. Well, if there ever was a problem, things have changed there. The world itself has moved on. Most high streets are no longer made up of small independents and local shops. Rightly, or wrongly; multi-national chains of identikit shops pack every high street and almost all of them accept American Express. More importantly all the big 4 supermarkets accept American Express.

So perhaps now is the time to start getting your hands on the cash back you’ve been funding for others? And who knows, with a few quid more in your pocket the recession might not seems quite so bad!

Written by : Mark is the Marketing Director at CompareandSave.com, having previously worked at a number of media agencies on various financial brands. He now splits his time between promoting CompareandSave and investigating new ways to help our readers save money. For press enquiries, please visit our Media Centre page.

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Credit cards affiliated to a rewards scheme are increasingly popular in the UK.

A reward credit card makes it easy to earn and redeem points for great perks just by using your card for everyday purchases. Our guide outlines three of the best reasons why you should consider a credit card offering rewards.

1. Low interest rates

As well as rewards, many cards also offer great interest rates on purchases. So, when you look for the best credit cards with rewards it is also worth keeping an eye out for some great value interest rate deals.

2. Easy to earn rewards

Once you receive your credit card it is simple to start accumulating rewards. Most schemes award points for every pound that you spend on your card and some offer additional points with certain retailers or on certain goods or services.

Whether you have a Barclaycard, Egg or MBNA credit card, the way you earn rewards will be broadly the same. However, the rewards themselves could be very different. Some offer points which you can redeem from a catalogue of goods while a cash back credit card lets you earn cash simply by spending on your card (be sure to pay off your balance in full every month, especially if you don’t get a 0% purchase period, or the interest you pay will far outweigh the benefits of any rewards you earn). Other schemes offer discounts in stores or even Air Miles.

3. Benefit from great rewards

Once you have accumulated perks through spending on your rewards card you then have a choice of a number of perks, depending on your specific scheme.

Reward credit cards typically offer:

•    Air Miles or other travel benefits
•    Discounts or vouchers in specific stores or with certain retailers
•    Cash back (on a cash back reward credit card)
•    Points to redeem from a catalogue of goods, including electrical appliances and home ware
•    Discounts on associated financial products, or preferential rates

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If you’re looking to improve your home, finding the cash can be one of the major factors that you have to consider. With a recent survey from a financial website finding that the average amount borrowed by homeowners to improve their property is £14,000, finding the right loan or credit card can be crucial to the success of your project.

And, with one in five owners having taken out borrowing to fund their work, using reward credit cards can be a great way of picking up additional perks.

Accumulate credit card rewards on your home improvements

The survey found that Scottish homeowners had spent an average of £6,000 on their home improvements, while West Midlanders had spent £30,000. And, while personal loans are a popular way to pay for a refit or redecoration, credit cards can also be a good way of funding the work.

Reward credit cards can help you build up cash back, vouchers or other rewards simply for using your card. Credit card rewards are awarded in proportion to the spending you make on your plastic so you can accumulate rewards quickly if you are paying for large scale goods or services on your card.

You may be able to benefit from Air Miles, vouchers or cash back simply for paying for home improvements or buying your supplies using your reward credit cards.

Compare credit cards to get the best deal

If you’re planning to fund your home improvements using a credit card, it is vital that you do your homework. You should compare credit cards so you can see all the offers available to you and get the best deal and to make sure that you don’t end up paying a high interest rate on your spending.

At compareandsave.com you can compare cards before applying online immediately. We also offer instant decision cards meaning you’ll know straightaway whether you’ve been approved for the credit that you need to pay for the work.

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If you pay off your credit card balance every month and don’t have a cashback credit card, you could be missing out on some extra cash.

Cashback credit cards reward you by giving you money back on every purchase you make – usually around 1% of your spend, though special offers can temporarily bring that up to 4 to 5%. If you pay off your balance each month so as not to incur interest charges, you can make a nice little sum in a year, particularly if you use your cashback card to buy the things you would usually buy anyway.

Cashback cards, which are a specialised form of reward credit card, have been in the news recently after the recently announced takeover of Egg credit cards by Barclaycard. The takeover, which is subject to regulatory approval, should be completed by June, and Egg customers are curious as to whether it will affect the terms and conditions of their accounts.

Currently, those with the ‘Egg Card’ can get 4% cashback on purchases of iPads and iPods from Apple, and £70 cashback on RAC home insurance. Those with the ‘Egg Money Credit Card’ get cashback of 1% on spending between £500 and £20,000 per year (with a £200 limit on cashback rewards each year).

When Barclaycard took over 1.7 million UK credit card accounts in 2008, a deal that handed Barclaycard brands like Goldfish and Morgan Stanley, it created four additional accounts to ensure that all the transferred customers got the same card benefits as they had before, so that bit of news is encouraging for Egg cardholders.

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The new Consumer Credit Directive takes effect no later than 1 February 2011. Card issuers are encouraged to adhere to the new rules as soon as possible, but all must comply by 1 February. This new directive will affect your credit cards, including cash back credit cards in several ways.

First, the Directive states that lenders have to advertise a ‘representative example’ of the cost of credit. That means when they show you an interest rate, they will have to include fees or charges in their calculations. For example, if a card charges an annual fee that is not reflected in the advertised interest rate, the lender will have to change the advertised rate to include the cost of that annual fee. It may not sound like much, but with some cards it can represent up to a couple of percentage points’ difference in the advertised annual fee, and this will make it easier for you to compare credit cards.

It is unclear how the industry will interpret this directive regarding 0% balance transfer cards. All charge fees for transferring the balance, and when you incorporate the fee, 0% is not accurate. The advertised APR is defined as the one relating to most transactions (available to more than 51% of applicants), so it would not necessarily apply to all cards. This is a change from the current definition of ‘typical APR’ which is defined as the APR that at least two-third of applicants can expect to receive.

One aspect of the Consumer Credit Directive that will affect you, whether you use a cash back credit card, or any credit card, is that you must be notified of changes in interest rates before the changes take place. Currently the credit card issuer must give you 30 days’ notice, but this will increase to 60 days. Also, your credit card provider used to have to tell you at least once about an impending change. With the changes in place, your credit card provider has to notify you of any interest rate increases at least twice. If you don’t agree to the interest rate change, you will have the option of closing the card and must be given a reasonable amount of time to pay off the card debt.

The order in which payments are applied to different interest rate debts on your card will be set so that higher interest rate debts are paid off before lower interest rate debts. There was no rule about this before, and almost all credit card providers directed payments towards the cheapest debts first, prolonging the higher interest rate debts. This will soon be a thing of the past.

The Consumer Credit Directive should be a positive step for consumers who use credit cards, by making credit card lending more transparent and understandable.

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While credit cards, used irresponsibly, can cause financial havoc, when they are used with discipline they can be a great convenience and, in some cases, can even make money for you. Here are 3 ways you can make a little extra cash by using credit cards.

1. Use a cash back credit card.

Many so-called rewards credit cards are available and cash back credit cards are an example of this type of card. Compare credit cards to find one that offers the highest percentage of cash back and has no limit on how much cash you can earn in a year. Make sure you choose a card that offers cash back on all purchases, not just on certain categories. You may be able to find a card that offers a 1% cash back reward for all purchases, but temporarily bumps up cash back rewards for selected categories. These can be even more profitable. Be sure to choose a card that does not charge an annual fee. If you use this type of reward credit card for purchases you make anyway, and pay your balance in full every month, you’ll amass a tidy sum at year’s end.

2. Look for credit cards that offer cash perks for new customers.

It is not that hard to find cards that will give you a cash bonus just for acquiring their card and making an initial purchase on it. Some cards offer you a cash bonus for doing a balance transfer to their card. This can be a great deal if you find a card with an extended 0% balance transfer option. You can use the bonus to help you pay off the balance you transferred even quicker. Again, this is only profitable if you pay your balance in full before any interest charges can accrue and choose a card without an annual fee.

3. Look for air miles credit cards if you travel a lot.

The third option for making money indirectly by using credit cards is for those who travel frequently: the air miles credit card. Credit cards, such as the Amex British Airways and the Lloyds TSB Air Miles Duo Credit Card, allow you to collect points on purchases which are applied toward the cost of airline tickets. The more you shop with your air miles credit card, the more miles you accumulate. Once you have enough miles, you can get free airline tickets. Your success at profiting from this scheme depends on paying off your balance before you have interest charges. Interest charges on air miles cards and on cash back cards tend to be higher than on plain credit cards, and if you are not sure you can pay off your balance every month, you may actually spend less by using a regular card with a lower interest rate.

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Adding to your savings doesn’t have to be all discipline and no fun. One of the most fun ways to add to your savings is to use a cash back credit card for all your normal spending and pay off your balance in full each month. If you get your cash back reward in the form of a cheque, deposit it right in your savings account and bingo – money for nothing.

Another easy and satisfying way to add to your savings is to compare savings accounts and switch to one that has the best savings rates. This is much easier to do than it used to be, and you can say goodbye to the pitiful savings rates you were getting with your old account.

If you’re entitled to benefits, such as Working Tax Credit, Child Trust Fund, or Child Tax Credit, take them. You can go to Turn 2 Us to use their calculators and determine if you are eligible for any benefits.

Other fun tricks to save money that people use include setting aside coins minted in certain years (the years of their children’s births, for example), collecting change at the end of each day in a jar, then depositing it once the jar is full. With kids, encourage them to save part of their allowance in a special bank, such as a classic piggy bank, then, at the end of each month, chip in a bit of “interest” on what they’ve managed to save and take them to the bank to deposit their money in a savings account.

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Are you rewarded for the spending you make on your credit card?

Reward credit cards are amongst the most common cards in other parts of the world. And now, they are also growing in popularity in the UK.  With most schemes, you receive rewards points based on the money that you spend on your card.  You can then redeem these points for a wide range of days out, flights, gifts or even holidays.

Here are the top three reasons you should consider reward credit cards.

1. Great rewards

If you use your credit card regularly and you pay off your balance in full every month then you should consider reward credit cards.  You will be awarded points based on your spending and so when you redeem your points, you will effectively getting be something for nothing.

The rewards you will benefit from will vary from card to card.  However, they typically include flights and gifts, although they can include hotel, new car or retailer discounts.

2. Low interest

When you are shopping around for reward credit cards, make sure you scour the market for the best credit card deals.  As well as reward points based on your spending, you will also find that some cards offer you extremely low rates of interest on your purchases.

Always look for a low interest rate.  Paying interest on your balance every month is likely to cost you more than the value of any rewards you may receive, so make sure you only look for the best credit card deals.

3. Cash back

There are a number of reward credit cards that offer cash back.  This means that you actually earn credit towards your card account, just for using the card for your everyday spending.

Some credit cards now build up cash back in the form of vouchers or credit to be used at a particular retailer, rather than actual ‘cash’.

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The main reason why you should compare credit cards is that your spending and saving style is unique, and by choosing a card based on your spending and saving habits, you can save yourself massive amounts of money over the long term.

The best credit card for you depends on whether you need to do a balance transfer, whether you pay off your balance each month or carry a balance over, and how many cards you tend to carry. The great news is that, with the internet, it is easier than ever to compare credit cards. If you only do one thing to help choose the best credit card, go to compareandsave.com and have a look at their credit card comparison tables. This alone can help keep you from making a very expensive mistake.

Cash Back credit cards are a specialized type of rewards credit card, but rather than “points” or other discounts, the reward is actual cash. Cash back credit cards can work great, but only under certain conditions. To actually benefit from a cash back card, always set up direct debit to repay the card balance every single month in full so that you never pay interest. Any interest you pay will easily offset any cash gain you receive. If you can’t repay your balance in full every month, then you’re better off looking for a low interest rate card. If you have existing credit card debts, pay off those debts first to maximise the benefit you get from your new cash back card.

Other reward schemes are very popular with cards, and they can benefit you as long as you choose a rewards scheme that rewards you with something you regularly use, such as airline miles. If there are several reward scheme credit cards with benefits you would use, choose the most generous rewards if you pay off your balance each month, and choose the one with the lowest interest rate if you do not. If you will be wanting to transfer debt, choose the one with the longest 0% balance transfer and the cheapest administrative fee for doing the balance transfer.

For many people, however, the bottom line when it comes to choosing a credit card is the interest rate. Most of us can’t be sure that we’ll be able to pay off our balance in full every month, even though that benefits us most. Therefore, choosing the card with the lowest interest rate is best for most people. Fortunately, with comparison tools like the tables on compareandsave.com and the tips on sites like moneysavingexpert.com, it doesn’t take much time to look at your options and choose the best one for your situation.

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