I know, I know… that sounds like a bit of a sweeping statement, doesn’t it?!
That everybody (including you and me) needs to have a credit card.
Especially considering what you’re generally told at school, and maybe by your parents too. I remember clearly that one of the first things we were told in the sixth form was “don’t get a credit card. Don’t end up in debt. You don’t want to ever borrow money”.
And yet here I am, in my 40s, declaring that everybody should have a credit card.
A credit card is a revolving credit facility. It allows you to spend money now and pay for it later. There are many different ways use it wisely and strategically, to get your money working harder for you.
So here’s 4 very good reasons that I recommend my clients have a credit card (and why you should too!).
#1: It gives you another way to pay for things
Obvious, perhaps – but I always suggest that my clients have a credit card with a bank that isn’t the one they normally bank with.
Let’s face it, in these days of technology, bank systems sometimes go down. You need a way to pay for your shopping or your petrol at the garage, if suddenly your NatWest or Barclays (or whichever) card suddenly doesn’t work.
This is why I say to make sure you have a credit card with a different provider than the one you usually bank with. You will have to read the small print on this, because some banks are all part of the same banking group.
If you take someone like Lloyds Bank, where my main accounts are, they’ve also got Halifax and the Bank of Scotland in the same group, so you’d need to pick a credit card with somebody else. But having this as a fallback method of payment, if your bank goes down or if you lose your debit card, can be a really useful thing.
It gives you a backup credit card to stick onto your Google Wallet or Apple Pay, to use in an emergency. Which is always handy and the kind of thing you wish you’d sorted out, when you get stuck and curse the fact that you can’t do what you need to do!
#2: You can pay for big purchases over a longer period of time
I’m talking here about using your credit facility strategically – not as an excuse to splash out on things that you really can’t afford!
But if, for example, your credit card is 0% on purchases for six months, you could use it to pay for something that you were going to buy anyway.
Holidays are a good example. You can pay it off in six equal amounts, so the balance is cleared before the interest rate kicks in. That way, it saves you having to dip into your savings or taking out a finance plan with the travel agent that could be more expensive.
The key thing is that whether emergency spending or planned spending, a credit card can be quite a good way of managing it.
Our office cabin is another good example. We’ve got a cabin in one of our fields that I used to run my business from and when we bought it, I put it on two credit cards at 0% over 18 months. I set the payments up so they were a fixed amount each month – allowing both cards to be completely cleared within 18 months – effectively giving me an 18-month 0% loan facility.
But do watch out, because if you’re not buying things on 0% or if you apply for a lot of credit cards in a short space of time, it can cause problems for your credit file or you could end up paying much more interest than you intended!
#3: You get consumer protection when you buy something over £100
This is well worth remembering. Even if you only put one penny of it on a credit card and pay it off the minute you get home, you are protected if the supplier goes bust.
Consumer protection can also be really useful if you buy a washing machine or TV or some piece of electronic kit that later fails, and you end up having an argument with the shop about whether or not they’ll refund your purchase.
It allows you to claim the money back from your credit card provider and they can then argue with the retailer about whether there’s a refund due.
It’s been really useful too for people who’ve gone on holiday and their airline has gone bust, for example, or there’s been some other sort of problem. It’s enabled them to get the money back from the credit card provider and leave somebody else to do all the aggravating stuff behind the scenes, rather than them ending up out of pocket.
As I said, as long as you pay for at least one penny of something over £100 on a credit card, the whole amount is fully insured. It doesn’t matter how long the balance is on the credit card for either.
I’ve got a client who doesn’t like having balances on a credit card. She will literally use the card while she’s out shopping, and when she gets home, log into her internet banking and transfer over the amount of money that she’s just spent, so that it always clears straight away.
Of course, do make sure you’ve got a direct debit set up to make at least the minimum payment every month or to clear it in full, if it’s a card that you are just using for consumer protection.
#4: You get perks and rewards!
If I’m being honest, this is the main reason I use a credit card – the perks.
When you pay for something in a UK shop, they’re not allowed to charge you any more for paying with a credit card than any other method of payment.
They can choose not to take credit cards or set a minimum value and only accept them for payments over £10 or £20. But if they accept credit cards, they cannot put a surcharge on your transaction for paying that way.
If you’re buying something for £30, it’ll cost you £30 whether you pay with cash or a debit card or gift voucher or credit card. So why WOULD you pay on a credit card?
Well, because several will give you some sort of reward for doing so!
Most of my spending goes on my American Express card, because I get points that I can convert to air miles. You can get a link to get free air miles too – just click the WhatsApp button below and type ‘AmEx’ in the box. I’ll ping you over a link where you can sign up and get some free points, and I get some free points too. Hooray!
American Express is great for getting air miles, but not everywhere takes it, because it’s more expensive for them to process than Visa or MasterCard. So I also have a Lloyds Bank MasterCard, which gives me cashback on my spending each month.
There are a whole range of companies that do cards with perks, so I’d suggest looking to see where you want to spend the money or the points. You can get a card from somewhere like Tesco or M&S, which gives you points to spend back in the store or to exchange for days out and other experiences. Other cards give you points you can swap for hotel stays and all sorts of other bits and pieces.
If you’re using a credit card just to collect the points, make sure you’ve set up a direct debit to clear the card in full at the end of every month. That way, you don’t end up building up a balance, because many of these cards do have really high interest rates.
I had a thing through my door this week about upgrading to a platinum American Express card, with all the perks splashed across the front of the leaflet in big letters. BUT the average interest rate is 694.9%, when you build in all the fees and charges. Which is huge. The rewards are brilliant if you’re 100% sure you’re going to pay it off in full every month, but it’s definitely not a card you’d want to build up a balance on.
So! In summary – credit cards can be a great way of leveraging the money you’ve got and giving you added protection on the stuff you buy. If you collect points or air miles to spend, it also then frees up other money in your budget to spend on other things. Happy days.
Using your money wisely is something I do with all my clients in the Expansive Wealth Collective. I only work with 3-5 new clients each month – to ensure everyone gets the personalised attention they need – and doors will be opening again to this 12-month mentorship soon.
If you’d like to know more about the Collective, just type the word ‘collective’ into the WhatsApp box at the bottom and I’ll send you over some details.
And if you’re not already on my email list, you might want to think about joining, because that’s where all the best offers appear. Just click here to get yourself on the list now! Just type ‘add me’ into the Whatsapp box below and we’ll sort it for you!
Until next time,
Claire