MONEY COMMENT
Five Card Tricks

By Cliff D'Arcy
February 5, 2003

I have a love/hate relationship with credit cards. On one hand, I love the convenience they offer, on the other I hate the extortionate interest rates, hidden charges and sneaky tricks that card issuers spring on us.

Until about five years ago, I was pretty reckless with my cards and often paid interest because I didn't clear my balance in full each month. At my peak, I had about fifteen credit cards - not enough for a full deck, but plenty for a single suit!

However, in 1998, I changed my wayward behaviour and, within a few months, closed all but one account. Nevertheless, being a rate tart, I've gradually acquired more cards, occasionally being turned down for credit along the way.

Having worked with or for several major card issuers, I know how massively profitable they can be for lenders. I also know some handy tips on using cards for your benefit:

Interest-free balance transfers

This is one of the easiest and simplest ways to slash your interest bill or get hold of free money. If you have a rolling balance on a card, you're probably paying between 15% and 30% interest a year. Why? There are about 20 different companies offering 0% interest on balance transfers, usually for between five and nine months.

Transferring a £3,000 balance could reduce your interest bill by £450 over six months (switching from a card charging 30% to a zero-rate deal). When your six months is up, switch the balance to a new card and repeat. Congratulations, you're now a rate tart.

Alternatively, if you're debt-free, you could get the unusually generous card company to pay, say, £3,000 into your bank account (warning: make sure it's interest-free and there are no charges for transfers or credit card cheques).

You can then invest this money into a cash mini-ISA for six months, earning up to 4.5% interest tax-free. Pay the loan back when the zero-rate deal ends and you've earned a handy £67.50 from someone else's money!

Cashback

Money for old rope: some cards pay you up to 1.6% (typically 1%) of every purchase. If you spend £500 a month on your card - £6,000 a year - you could earn an extra £60 a year (at 1%). Whenever possible, I buy everything costing more than £4 on my credit card for maximum cashback, paying off my bill in full each month. Once, I even considered buying a car using a credit card, just for the cashback!

Statement planning

Otherwise known as "transaction timing". I've noted the statement dates on the back of each of my cards and don't buy anything in the two weeks before statements are due.

I time all my big purchases - such as my monthly season ticket - for the day after a statement is produced, so that I can enjoy the maximum interest-free period available. This can be up to 59 days (31 days in most months, plus 28 days from the statement date until payment is due). Pay off the bill in full each month and you're benefiting from up to two months' interest-free credit.

Purchase protection

Many issuers offer free insurance to cover goods bought with the card. If your property is lost, damaged or stolen within a specified period (usually up to 100 days from the purchase date), you can make a claim against this cover. It's very useful for fragile or high-value goods but don't pay extra for it, as most providers offer it for nothing. Check the small print; various items and situations are not covered.

Charity cards

Donation cards are an easy way to direct money to your favourite cause without costing you a penny. Opening a charity card triggers a one-off donation to your good cause, usually £10 to £18. Additionally, a percentage of your spending - normally 0.25% to 0.3% - is paid to the charity each year.

So, if you open a donation card and spend £500 a month on it, your charity will get anything up to £36 in the first year and around £18 a year thereafter. Shopping with a conscience!

If you use these tricks carefully, you can actually make money from your card. You'll probably become your bank's least favourite customer in the process but, in an age when financial disloyalty is actively rewarded, who cares?

> Learn more and apply online at our Credit Card Centre.