How to fight inflation with a credit card


The Bank of England recently warned that the UK's inflation rate could soon rise to its highest point since September 2008. This could make the cost of living very expensive and leave families struggling in an already difficult financial climate.


However, there are some ways you can help reduce your outgoings and combat inflation just by using a credit card. Here's how.

Squeeze out savings with a cashback credit card
Free money is usually hard to come by, but these types of cards really do offer their customers cash-back in return for spending on the card. It might not seem like much, but if you use the card on a regular basis, you could accumulate a significant amount in cash savings.

The best way to take advantage of this type of card is to spend as much as you can afford to repay in full on your credit card and then pay it off at the end of the month, thereby never paying any interest.

You can use a cashback credit card just like any other credit card. It does not have to be used at a specific retailer. It can be used anywhere the card issuer is accepted.

However, some cashback cards will offer a higher cashback rate when the card is used in a particular type of store. For example, the Santander 123 Cash Back Credit Card offers:

  • 1% cashback on supermarket spending.
  • 2% cashback on department store spending.
  • 3% cashback on fuel spending (capped at £300).

Tip: In order to get the best value for your money, compare credit cards online to find the card with the best cashback rate; use the card as much as possible and then pay off the balance immediately.

Save on goods and services with a points-based rewards credit card
When you apply for a points-based rewards credit card, you will become a member of the card provider's points scheme and earn points for every £1 you spend. These points can be exchanged for gift vouchers for supermarkets, adventure trips, High Street retailers and many other things.

Before you choose a points-based card, analyse your outgoings to find what you spend the most money on. Then look for a card with corresponding rewards. For example, if you have a large family with a massive food bill each week, it would probably be more beneficial for you to apply for a supermarket card which could offer you money off your shop. In addition, some cards, such as the Tesco Clubcard credit card, offer double points for spending on the card in their store.  

Tip: Rewards credit cards often provide a bonus for spending over a certain amount in the first three months.This bonus can often be worth hundreds of pounds so make sure you take advantage of it as it could take months for you to earn the equivalent. 

Save at the fuel pump with fuel rebate credit cards
These rewards credit cards are much harder to come by than others, but there are still some available. They work in the same way as the points schemes and cashback cards: The more money you spend on the card, the more discount you earn on your fuel.

The rate of cashback on fuel spending is usually much lower than with other cashback cards, but they can still be worthwhile in the long-term, particularly if you commute or travel long distances on a regular basis.

Some cards will offer a specific discount on fuel, whereas other will simply offer cashback on fuel spending.

Tip: Due to the high interest rates associated with rewards credit cards it is important that you never spend money you don't have. The best way to maximise the benefits on offer is to use the card to pay for the transaction and then pay off the balance before your credit card bill is due.

See related: Study: Worst consequences of recession 'still to come'; Cashback credit cards can bridge savings

Published: 30 September 2011