Credit cards have huge benefits but many of us are using them all wrong – either spending more than we can afford, spending too little, or avoiding them altogether. Because not having one feels like a lot less hassle, right? Wrong.Using a credit card in a sensible way can actually boost your financial wellbeing, help you manage cash flow, build up a healthy credit score and show lenders you’re reliable. You can even make money back on your purchases with an American Express® Platinum Cashback Credit Card*.
Follow this back-to-basics guide to bust the jargon, reap the benefits and use a credit card effectively.
Be clear on your #creditcardgoals
Not all credit cards are the same, so you need to think about what you want one for. Do you have an overdraft and want to clear it by transferring to a 0% balance transfer card, or are you looking for rewards and cashback? Make sure you find the right card for you by checking out market comparison sites.
Reap the benefits of cashback
Most people aren’t aware that a credit card can earn you money back in your account. With the American Express Platinum Cashback Credit Card*, you can earn money back on all your purchases. The cashback bonus means new Cardmembers also get 5% cashback on purchases up to £125 for the first three months (and up to 1.25% after that).
Members can also enjoy selected offers from a range of retail and travel partners – you just choose the offers you like, save them to your card and spend in line with the offer requirements.
Having said that, cashback isn’t an excuse to buy beyond your means; think of it as a bonus.
Get your head around APR
When you’re deciding on a credit card, don’t ignore the APR, aka the Annual Percentage Rate. This is the fee you will pay on any outstanding debt after the monthly due date, which makes setting up that direct debit to pay your balance off in full and on time very important.
Check, check, check
There is one more step before you apply for that card – check your eligibility! Every provider has certain boxes that customers have to tick off. For the Platinum Cashback Credit Card*, American Express asks questions such as, are you aged 18 or over? Do you have a current UK bank or building society account and a permanent UK address? Pretty basic things. But if you don’t check them off before applying, you might be rejected and it could impact your credit score.
Wait – what's a credit score?
A credit score is an indicator of your financial health and tells you how likely you are to be awarded a product like a loan, mortgage or phone contract. It’s a good idea to also check your score before applying for a credit card – again, if you apply and are rejected, it will impact your score. Most providers let you check it for free.
A credit card can be a really helpful way to maintain or build up your score – by making regular purchases and paying your balance off in full at the end of the month. Other good tips to improve your score are ensuring you’re on the electoral register, your details are all up to date, and you’ve paid off any high interest debt.
Get cracking on that application
Once you’ve chosen the best card for you and you’ve checked your credit score is in good nick, it’s time to fill in your application. You can usually do it online (where most of the best deals are) or via post or in branch. Fill in all the details as accurately as you can – typically you’ll need to know things like your bank details, the last few places you’ve lived and your annual income before tax – and then hope for good news. All being well you should get your card within two weeks.
Don't let charges bite you
The immediate next step is to set up a direct debit to pay off the balance in full. This way, you can relax knowing you won't be slapped with any costly charges.
If you buy something with a credit card and you’ve not paid off your balance by the end of the billing cycle, you will be charged extra. It’s called a purchase rate, and is similar to an overdraft on a bank account.
Purchase rates vary between providers and some offer a 0% introductory rate. Just make sure you know what yours is and how long any offers for new customers last.
What happens if you buy a new dress for a party and it’s damaged or never even arrives? Your credit card provider may give you money back, even if the retailer doesn’t cough up. That’s an added bonus that doesn’t apply to your normal debit card!
While all credit cards have to offer basic consumer protection, some premium credit cards go the extra mile. For example, American Express covers up to £200 per eligible item bought on the card that the retailer will not take back within 90 days, or up to £2,500 for an item that is stolen or damaged within the same timeframe. (Terms apply.)
*Representative 28.2% APR. Annual fee applies. Terms, conditions and exclusions apply. 18+, subject to approval. Cashback is paid annually. New Cardmembers get 5% cashback on your purchases (up to £125) for the first three months of Cardmembership. Spend £0 to £10,000 and receive 1% cashback on all purchases. Spend over £10,001 and receive 1.25% cashback on all purchases. Promoter American Express Services Europe Limited is authorised and regulated by the Financial Conduct Authority.