Is it worth it? (Picture: Getty Images)
Over the years I’ve made thousands of pounds of free cash by spending with a credit card.
Getting the right cards at the right time and using them in the right way can be one of the more lucrative ways to make a decent sum with little effort.
The most common money-maker is to earn cashback or points for every pound you spend.
You simply need to swap using your standard bank debit card for a specialist credit card and you’re away. At best, you’re looking at one per cent back, which will add up.
The key rule here, as with every credit card, is to clear the balance owed every month. This way you avoid getting charged interest, which would not only wipe out any money earned but also get very expensive.
And the big bucks come via welcome offers for new cardholders. Often there’s a huge points bonus or increased cashback rate in the first few months. These tend to be worth around £100, but boosted offers can increase this up to a couple of hundred quid, if not more.
Time your application for when you have a big expense – that annual train season ticket or your holiday deposit (Credits: Getty Images/Westend61)
However, these bonuses generally require a minimum spend to trigger them – and that’s where you might fall foul.
For many of the American Express cards, for instance, that threshold is usually around £3,000 over three months. Some require an even larger spend, and sometimes you’ll get longer to do that – such as the newly boosted American Express Platinum credit card.
There’s up to £450 of freebies, plus annual travel insurance on top, but you have to spend £10,000 in six months. That’s some very big spending!
But if you spend a penny less on any sign-up deal, or take longer than the time allowed to spend, you won’t get any of the bonus.
These bonuses can make people feel pressured to use their credit card (Picture: Getty Images)
This can put pressure on people to spend more on their cards than they normally would in order to not miss the free cash. And that can have a knock-on effect if you can’t afford to cover those increased bills.
It means if you can’t reach the required amount on your everyday spending these offers are best avoided. Or alternatively, time your application for when you have a big expense – that annual train season ticket or your holiday deposit, perhaps.
If that feels manageable, there are other steps to take before signing up. First, find out if you are eligible for the offer. Card companies will have their own rules about whether new, old or existing customers can get these welcome offers, and they can also vary by card.
Next, I’d always suggest you use a comparison site or the credit card company’s own website to run an eligibility check. This uses a soft credit check to give you a sense of whether you’ll be accepted – a much better route to take than a full application that will leave a mark on your credit report.
Is it worth the hassle or can you really reap the rewards?