Beat inflation with the latest credit cards

12th December 2011  

credit card selectionsIf there’s one thing that’s guaranteed to have an eroding effect on your standard of living, it’s inflation. Whilst the monthly reports from the Bank of England may seem just distant numbers relevant only to the Square Mile’s bankers, inflation actually has a major impact on the cost of everything from the bread for your morning toast to the fuel you put in your car.

There have been stark warnings lately about how inflation is set to rise even further next year, and the current Eurozone crisis will also have a direct impact on Britain’s finances.

So how can you combat inflation and keep your outgoings at a more manageable level?

Strangely enough, the answer could lie in your wallet, by using your credit cards in a smart and savvy way. That doesn’t mean piling on the debt in a ‘buy now, pay later’ way (that’s what got many people into trouble in the first place). It’s about taking back control, shopping around for the best credit card deals and taking advantage of the offers card lenders use to tempt in new customers.

Free money!

Yes, you did read that right. Using a cashback credit card wisely could effectively mean you earn as you spend. The one proviso with cashback cards is you must avoid paying interest. i.e. only spend as much as you can afford to pay back in full at the end of the month. If you end up paying interest, this will cancel out any positive financial effect of the cashback!

Cashback credit cards are exactly the same as ordinary cards. You don’t have to use them at specific retailers (unlike some store cards) to get cashback on your purchases. To see which cashback card will give you the best return, you’ll need to analyse your own spending profile and look at our best cashback card deals.

Points mean prizes…

The alternative to cashback is a rewards credit card, where you earn points for every pound you spend. These points can then be exchanged for gift vouchers, or account credit. To make the most of points-based cards, analyse your outgoings and see where you spend the majority of your money. For example, if you have a large family and a big weekly food bill, look for a card that rewards you with points that can be used in your regular store such as Tesco or Sainsbury’s.

Points-based or rewards cards often provide a bonus for spending over a certain amount in the first three months. But before you get too carried away, make sure that

a) you can afford to pay back the amount you spend (if you end up paying interest, it will cancel out the benefit of any rewards)

b) the rewards merit the extra expenditure.

Pumping up the points

Less common but worth tracking down if you spend a lot of money on petrol or diesel every week are cards that offer a cash/fuel rebate. Inflation has a huge effect on the prices at the pumps, and with petrol rapidly heading towards the £1.50/litre barrier, every penny really does count. These cards work in the same way as the normal reward cards, but could make a huge difference to your monthly fuel costs if you’re a high-mileage driver. Check out for instance the AA Credit Card which offers double rewards points on motoring spend (including fuel). These points can be converted back to credit on the card.

The most important thing to remember is to never borrow more than you can afford to pay back, and to keep looking out for deals that suit your lifestyle. By playing it smart, you can beat the Chancellor at his own game and dodge those rising inflation figures.

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