Get The Most From Your Credit Card

Credit cards can be evil beasts or potentially lucrative bits of plastic. We show you how to get the most from yours.

Although February proves to be a miserable month for many, with the horrors of Christmas dropping on doorsteps in the form of credit card statements, it's not all doom and gloom. If you're one of the many that pays off their credit card bill on time, each month, February need be no different to any other month.

What's more, if you can take it one step further, and understand how your credit card works, you could reap rewards with clever use. So here are five ways to get the most from your credit card.

1. Interest free period

We all know that unlike debit cards, credit cards do not take payment from you every time you buy something with the card. Instead, all of those transactions are saved up until a set date, each month, when your statement is created. This details what you owe and the date by which you must pay it off (if not to be charged interest) and is known as the interest free period. Depending on the card you have, you'll get anything up to 59 days (that's nearly two months) until you need to pay.

The trick, therefore, is to know when your statement is created. If, for example, this is on the 14th of every month, if you can hold off any big purchases until the 15th you'll get the maximum period before having to pay for that purchase. Check your old statements, or give your provider a call and find out when your statement is created and start strategically planning your purchase dates.

2. Cashback

These are an old favourite of mine -- credit cards that effectively pay you to spend! Switch your spending to a cashback credit card and, every time you spend a pound you could earn back a percentage as cashback. You'll either be sent a cheque each year for your cashback, or it will be credited to you account, but either way it's a nice bonus that can be used to buy a treat or two.

For example, the Morgan Stanley Platinum card currently pays 3% cashback on spending up to £2k (until 1.6.07) and 0.5% after this. If you were to spend £500 or more, per month, you could earn over £80 in cashback, in a year.

High spenders could make more from the American Express Platinum card, which pays 3% cashback on spending for the first three months, followed by 0.5% for spend up to £3,500, 1% for spend from £3,501 to £10k and 1.5% for spending above this.

Clearly, the way to maximise your cashback is to put as much of your normal spending on the card as possible. So think twice before paying with cash/debit card for anything. Pay for everything you can, however small with the card, or save up your purchases and buy them altogether and you could have a healthy sum to look forward to in a year's time.

3. 0% for new purchases

Although we often hear about the savings to be made from balance transfer cards, many people fail to appreciate the merits of a 0% card for new purchases. Clever use of these cards could mean you could make hundreds of pounds each year -- and as they don't charge balance transfer type fees, you keep more of your savings.

The trick here is to use the card for all of your normal spending, but instead of paying the balance off each month, pay the minimum instead and move the extra cash into a high interest savings account. When the interest free period expires, use this money to pay off the card's balance and whatever interest has been made is yours.

For example, £500 spent on the Marks & Spencer (M&S) &More credit card each month that is stashed in the Icesave account (currently paying 5.7%AER) could earn £183 before tax, over a year. What's more, you'll also earn M&S loyalty points on your spending, so you could collect a few M&S shopping vouchers for your trouble, too.

4. Loyalty Points

Many credit cards offer cardholders the opportunity to earn loyalty points with their spending, which can be great for racking up those points more quickly. What's more, some allow you to collect points that are only available through the credit card scheme.

For example, you can earn one loyalty point for every £1 spent on the Amazon credit card; collect 1,500 and you can trade it in for a £15 Amazon voucher. Asda shoppers who hold its credit card can earn points on the first £6k spend each year. And if you use the card to pay for petrol at an ASDA petrol station, you'll save 2p per litre.

Like the cashback cards, the way to get the most from a loyalty credit card is to use it for every purchase. Some schemes offer more points depending on which shops you spend at but, as always, make sure you're paying the best price. There's little point in paying more for an item simply to earn a few more points if it's a fiver cheaper down the road.

However, before you take out a loyalty credit card to specifically earn more points, check the details first to make sure it's worth your while. For example, the Tesco credit card pays 5 points for every £4 spent in store, and one point for every £4 spent elsewhere. However, Tesco's free loyalty card -- the clubcard, pays one point for every £1 spent instore. You could therefore find that using the free Tesco clubcard and taking out a cashback credit card a far more lucrative option.

5. Extras

Finally, don't forget the extras. All credit cards come with consumer protection, commonly known as Section 75. Buy an item costing between £100 and £30,000 and, as long as you pay for at least some of it on the card, the credit card company will be equally liable with the retailer should something go wrong (or the retailer go bust!). This is why credit cards are one of the best ways to pay for items such as holidays and internet shopping (however, watch out for unfair fees charged by some travel agents for those paying by credit cards).

If you're buying an electrical item, you'll typically be offered the chance to pay for an extended warranty. However, not only are these warranties vastly over-priced, many credit cards offer a one year extended warranty, absolutely free -- you just need to buy the item with the card. Check your details and simply call your provider with details of your purchase to extend your warranty for free.

And finally, another great option offered by many cards is free purchase cover. This will cover any item costing more than £50 that was bought with the card should it be lost, stolen or damaged.

So hopefully this has given you a feel for some of the extras available with credit cards, and how to get the most from yours. Of course, credit cards offering any type of benefit typically have high APRs -- miss one payment and you could pay far more in interest that you could ever make. If you can't trust yourself, stick to a debit card.

However, if you know you're the sensible type, why not make the most from your credit card?

More: Compare Credit Cards At The Fool | An Innovative Credit Card | When Balance Transfers Backfire