When it pays to use plastic

Credit cards have 2 purposes: first, they’re a way to spend; second, they’re a way to borrow. But if you set up a direct debit to pay the card off in full each month, you effectively turn the card into a debit card. Then the party starts.

First, there are cards that pay you cash back every time you spend on them—quite simply, they give you a cut of the revenue they get from retailers. On the best of these cards you can earn around £450 a year on a spending of £20,000. If you’ve defeated the interest demons with your direct debit, you’re making money simply for using a different piece of plastic.

Credit cards can also protect you: buy something over £100 and pay fully, or even partly, by credit card and, thanks to Section 75 of the Consumer Credit Act, the card company is liable equally with the retailer if anything goes wrong—a protection you don’t get with debit cards. When the Farepak Christmas club collapsed (and again recently with wedding list service Wrapit) only people who paid on credit cards had any chance of getting their money back.

If you’re a real money nerd—and for real revenge against the card companies—you can make serious cash by exploiting the 0% interest period offered by some cards. After all, if a card company is willing to lend you money free of interest, you can take this cash and save it in a high-interest account at 6%. This is called stoozing and I’ve done it for a long time. The biggest stoozer I’ve ever heard of had over £90,000 on 0% cards and made more than £10,000 by paying off his mortgage this way.