Credit cards always cost you money, right? Wrong! We show you three ways to make a profit from plastic.
There are roughly 72 million credit cards in the UK, but only 48 million adults.
In other words, there are 1½ credit cards for every person who is eighteen or over. Another way to look at credit-card saturation is, with 25 million households in the UK, there are almost three credit cards for every household. That's a plateful of plastic, by most measures. Naturally, they do things bigger and better in the US: with 1.2 billion credit cards shared between roughly 120 million households, their average is ten credit cards per household. Wow!
Currently, we owe over £56 billion on our credit cards, of which more than three-quarters (76%) is interest-bearing. With an average annual interest rate of 16%, this means that we're paying close to £7 billion a year in interest alone. Ouch! When you add in the profits from rip-off payment protection insurance, plus fines for late or bounced payments, you begin to see why credit cards are so incredibly profitable. However, if you play your cards right, you can avoid paying interest and other charges, plus you can even make money from your plastic. Here are three ways to do just that:
1. Spend on a 0% on purchases card
If you time your transactions carefully and always pay off your bill in full, you can enjoy up to 59 days' interest-free credit by taking advantage of your card's standard interest-free period. However, by spending on a credit card which offers an extended introductory 0% on purchases deal, you can stretch this interest-free period to between six and ten months.
By making all your purchases on a Best Buy card, you effectively defer your spending for up to ten months. By putting the money saved into a top-notch savings account and then using it to settle your entire bill just before interest kicks in, you can boost your savings interest at no cost.
2. Use a cashback credit card
By doing all of my spending on a Best Buy cashback credit card, I aim to earn around about a tenner a month from spending on plastic. According to Moneyfacts, spending £1,000 a month on a Morgan Stanley Platinum or Cashback MasterCard will build up cashback of £140 in the first year. Other Best Buys in this category include the American Express Platinum card (£125) and Egg Money card (£120).
3. Become a super-tart or stoozer
Online bank Egg introduced the first 0% on balance transfers card on Christmas Day, 2000. Close to five years later, there are 91 credit cards offering introductory 0% on balance transfer deals lasting five months or more. Alas, 41 of these charge balance-transfer fees, which make them less attractive to card tarts.
As you can guess, I'm a big fan of 0% cards. Indeed, I'm one of a growing band of clued-up card players who make big money from beating the system. I'm a super tart or stoozer: someone who borrows interest free from 0% cards and then places this money in a high-interest savings account (or in an offset or current account mortgage). At my peak, I owed almost £60,000 to various 0% card issuers, on which I earned about £275 a month before tax in a tip-top savings account. Eureka!
One final warning: stoozing is only for canny and disciplined card players, so don't try it unless you know the rules of the game!
More: Check our deck of charming credit cards | Your Ultimate Guide To Credit Cards.
