How to perk up your credit card

The days of the 0% balance transfer may be numbered but the battle for our credit card custom continues apace with credit card providers offering an array of different perks to lure us in. These can be anything from earning points towards vouchers, money back or Air Miles.

The latter remain one of the most popular forms of reward and are now offered by around half a dozen credit card providers. But the amount you need to spend in order to qualify for a free flight varies considerably. For instance, a return ticket to Paris could cost you anything from £3,900 with the buy and fly MasterCard from Morgan Stanley up to £20,000 if you use the Citi A-Advantage Visa card.

Somewhere in between these come Royal Bank of Scotlands Platinum Visa and Natwest Banks Platinum MasterCard/Visa card, both of which would require a spend of £9,000 for a return flight to Paris.

But many rewards come with strings attached. For instance, the Morgan Stanley cards points expire after two years which could mean that you may never accumulate enough points to be able to use them by the deadline.

Furthermore, if you want a free long haul flight, you may be better off with the Citi A-Advantage card or the British Airways Amex card, both of which give you one Air Mile for every £1 spent. However, unless you are a frequent flyer or particularly want free flights for some reason, taking out a credit card just for the Air Miles is not generally a good idea.

Cash back may be more attractive than Air Miles

Assuming that you always pay off your entire bill on time each month and are therefore not concerned about the interest charged, you may prefer to take a look at one of the many cash back deals on offer. These are easier to compare as you simply clock up a certain amount of cash back each month, based on a percentage of your monthly spend, which is reimbursed to you at the end of the year.

The majority of cash back deals are based on 0.50% of your monthly spend, including those for the Capital One Circle Rebate, Create Card (Lloyds TSB), Egg Blue, Mint, Scottish Widows Cashback Mastercard and Smile cards.

Some of the more generous cash back deals include the Abbey cash back credit card which rebates 0.50% up to £500 and 1% thereafter, and the American Express Blue which rebates 2% for the first three months and 1% thereafter.

The American Express Platinum card pays 0.5% up to £2,000, 1% to £5,000 and 2% thereafter but, remember, American Express charges an annual membership fee which may put off but all but the biggest spenders.

Another popular reward scheme is Goldfish cards points system whereby you clock up points which may be redeemed for vouchers at a large number of high street stores. For instance, a £1,500 spend would get you a £10 Boots voucher.

But it seems that the cost of these schemes has been too much for some providers. Alliance & Leicester, one of the pioneers of cash back, recently withdrew the money back feature on its MoneyBack credit card, except for those customers who were willing to open a Premier, or Premier Plus Current Account and apply for the associated credit card.

In the final analysis, all reward schemes are just a distraction if you cant clear your bill each month.. Anna Bowes of Chase de Vere Private Clients comments: "If you know that you wont be able to pay off your entire bill each month, it is much more important to choose a card with a low, or nil, rate of interest."

17 May 2005 © Moneyextra.com

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