We’ve all probably come across that guy who either avoids credit cards like the plague or has ruined (or is ruining) their finances using them.

It’s likely that the person that you’ve heard of has terrible money habits or knows someone that does. They probably spend £100s on:

• Fancy dates
• Expensive dinners/take outs
• Drinks at the bar/pub
• Frequent/luxury travel
• Monthly car finance payments
• Shopping sprees
• Or any combination of these things, plus more

However, if you’re someone that saves for emergencies, pays their bills on time and still has money leftover at the end of the month, then credit cards are one of the best tools you can use to increase your wealth.

Here are 4 ways some of the people around me and I have used credit cards to increase our personal wealths (keep reading till the end, the last one could save you £1000’s).

1. Earn interest on the money you spend

If you read our previous article, you’ll know that the credit cards only charge you interest on your spending up to 56 days later. Instead of spending your pay check, spend the bank’s money on the things you want instead! In the meantime, stash your pay check into a high interest, easy access savings account where you can earn interest on your money. At current rates of up to 5%, you could be earning could be earning a free £125 a year on an average pay check. Just remember to take that money back out to pay your credit card bill and repeat!

2. Earn rewards on your spending

Many credit cards on offer have a rewards points system to encourage you to spend more. In the UK, an American Express card earns at least 1 point for every £1 you spend which can be worth as much as 2p per point. For the average spender, that’s a free £220+ per year just from your regular spending! Don’t use this as an excuse to spend more than you can pay back, or you’ll lose money instead by paying high interest rates.

3. Get interest-free ‘loans’

A few credit cards out there have introductory ‘0% money transfer’ offers for when you first sign up. These cards will let you withdraw up to 95% of your card’s credit limit into your bank account at a 0% interest rate. It’s basically an interest-free loan! You can spend the money however you like!

If you’re wise enough to put the money in a high interest savings or investment account (at your own risk), you stand to make £100’s. The only catch here is that you must pay back the borrowed amount before the 0% interest period expires, or you’ll be charged high interest rates afterwards.

(Note that you’ll need to have a good credit history to be accepted for a 0% money transfer card (I’ll be covering this topic soon))

4. Get access to the lowest mortgage rates

If you’re looking to buy a house, chances are that you don’t have the £260,000 needed to buy the average house in the UK. Instead, you will have to pay a deposit and borrow the rest from a bank by taking out a mortgage. Like with all borrowing, this isn’t free (especially if you skipped the rest of this post and didn’t read point #3) and you’ll be charged interest

For every £100,000 borrowed, you could save £2000 a year just by getting a 2% lower rate on your mortgage. To get the lowest and cheapest interest rates, however, you’ll need to show the bank that you are a reliable borrower (or in finance speak, an excellent credit history).

By taking out a credit card and paying your bills on time over many months, you’ll be building a worthy credit history that’ll get you closer to accessing the lowest interest rates. Over a 25 year mortgage period, you could increase your wealth by least £50,000! Just bear in mind that there are other things that banks will also be looking at to decide your interest rate (I’ll be covering this in a future post).

With all these perks to owning a credit card, getting one is a no-brainer! Sign up to MoneySavingExpert or Experian to compare and find the best one for you. Before signing up, remember that credit cards are designed to amplify your money habits – read my previous article on how to best to use one to avoid being that guy from earlier.

This post was inspired by my office manager, H, who refuses to get a credit card despite the entire office telling him to. Hopefully he sees this one day and decides to change his mind!