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Never pay with cash
1. Extra protection
Paying with a card means you’ll have extra protection if something goes wrong with your purchase – protection you won’t enjoy if you pay cash.
The strongest protection is called ‘Section 75’ and applies to all credit card transactions where the purchase price is between £100 and £30,000.
In that situation, the card provider and the merchant are jointly liable for the product that is sold. So if you’ve bought a faulty item, you can ask either the merchant or the card provider for compensation – the choice is yours.
The crucial point about Section 75 is that it is derived from an Act of Parliament, and you can enforce this protection in the courts.
You don’t have to pay the full purchase price with a credit card to qualify for Section 75 protection. If you use a credit card to pay a £10 deposit on a £200 item, and pay the remaining £190 with cash, you can still claim under Section 75.
But if you’re buying something cheaper than £100, or more expensive than £30,000, you have to use a different form of protection called ‘chargeback.’
This form of protection is offered by most card providers and you can make chargeback claims for both credit card and debit card transactions.
The details of these chargeback schemes vary from provider to provider but they all enable you to ask for your money back if there is a problem with the goods or services you have bought.
It’s important to note that these schemes don’t have any statutory backing, so if you feel you’ve been treated badly by your bank, you can’t take the bank to court. However, you could complain to the Financial Ombudsman Service.
There’s normally a time limit for claims under chargeback. Under the Visa chargeback scheme, you need to claim within 120 days of you becoming aware there’s a problem.
2. Interest-free spending
OK, so you need to be careful with this one. After all, if you’re spending on a credit card you don’t want to go too crazy and spend more than you can afford.
However, if you do need to purchase something important and you’re worried about how to pay for it – perhaps you’re moving home and you need to get some new furniture - a 0% on new purchases card can be very handy.
For example, if you buy something with a new Tesco Clubcard Credit Card, you’ll have 16 months in which you won’t have to pay any interest on the resulting debt. That’s as long as you make the minimum payment each month.
If you don’t fancy a Tesco card, you can get 15-month 0% periods with the M&S Credit Card and the Halifax All in One MasterCard.
Alternatively, if you’ve already spent on a credit card that’s racking up interest, move it over to a 0% balance transfer credit card.
The current market leader is the Barclaycard 23 Month Platinum Visa card. You won’t have to pay any interest on your balance for 23 months. The only cost will be a 2.8% balance transfer fee – that’s lower than the fees for many rivals.
The Capital One Balance Card Visa is another attractive card for balance transfers. Admittedly the 0% period only lasts for 8 months, but the point is that people with an ‘average’ credit rating can get this card – that’s not the case for most 0% cards.
It’s also worth bearing in mind that any credit card purchase effectively gives you a short-term interest-free loan. If I use my credit card for my weekly grocery shop this weekend, I won’t be charged any interest on the resulting debt for a period that could last for as long as 56 days!
3. Earn cashback
Some credit cards will also allow you to earn cashback as you spend. So this means you can be rewarded for your spending and earn a percentage of money back!
We especially like the aqua Rewards MasterCard. It’s designed for people with poor or non-existent credit ratings, but it actually offers a very generous 3% cashback on everything you buy all year round. Even better, you won’t have to pay an annual fee to get this card – unlike many rival cashback cards.
The only real downside is that your cashback is capped at £100 a year.
The Santander 123 Cashback MasterCard is another great card. It pays 1% on supermarket spending, 2% in department stores and 3% on petrol or train fares. On the downside there is a £24 yearly fee..
However, if you are going to use a cashback credit card, you should only do this if you can be certain you will pay off your bill in full every single month. If you don’t, you’ll be charged a hefty interest rate which will offset any cashback benefits.
4. Earn rewards
Similarly, some credit cards also allow you to earn rewards as you spend – which again, you won’t be getting if you’re spending with cash.
For example, the Sainsbury’s Nectar credit card offers 10 Nectar points for every £1 you spend in Sainsbury’s for the first three months you have the card. After that introductory period, you’ll get 4 points for every pound spent at Sainsbury’s and one point for every £5 you spend elsewhere.
5. Track your spending
Paying by credit card or debit card also means you'll more easily be able to keep track of your spending – which means you can budget better. Rather than regularly withdrawing cash from an ATM and then spending it on various things you quickly forget about, spending on a card means you can track what you spend where.
So there’s loads of great reasons to spend with a card. In fact, you should never pay with cash!
