Get paid for credit

By HELEN LOVELESS, MAIL ON SUNDAY ENTERPRISE EDITOR
Updated:

 

Looking to earn a better rate of interest on your money? Taking out a credit card could prove a better bet for savers than the average high street bank account.

That's the message from friendly society Liverpool Victoria, which today announced it would pay interest to cardholders whose balances were in credit.

Customers who use their cards in this way will earn interest of 3.25% for balances under £500 in credit and 3.75% for balances in credit to the tune of £500 or more.

In fact, the Liverpool Victoria credit card offers a better rate of interest on positive balances than many current accounts and even some savings accounts.

For example, the interest rate on abbey's standard current account is just 0.1%, although you can earn 2.5% if you pay in more than £1,000 a month. However, its eSaver web-based savings account pays annual interest equivalent to 4.10% on balances of £1+.

Woolwich's Openplan current account pays interest of just 0.1% on balances in credit. Interest is paid at 2.75% for balances between £1-£999 on the Openplan Savings Reserve account.

Lloyds TSB pays interest of just 0.1% on its Classic current account. However, people opening a Classic Plus account and paying in at least £1,000 a month will earn interest of 3.08%, rising to 3.75% for those paying in at least £2,000 a month.

Nigel Snell, Head of External Affairs at Liverpool Victoria, says the society is keen to encourage cardholders to make the most of their money by ''front loading' - i.e., making an advance deposit on their credit card in order to earn interest on the positive balance.

He says: 'Many people will be unaware that they could receive interest on a positive balance on a credit card, and at an interest rate that is more competitive that many savings account.'

But the move was given only a lukewarm welcome by Mike Naylor, spokesman for the consumer watchdog magazine, Which: 'Obviously there is a benefit if you are in credit, which in itself could happen quite easily. However, we would particularly encourage people to use their cards in this way,' he says.

'For example, you would have to spend money to access your money, and what if you needed instant access to funds? The average person would be better off sticking their savings in a cash Isa.'

There is an introductory rate of 3.9% p.a. on balance transfers for the first six months, rising to 16.7% after this has ended. The variable APR is 16.7% for purchases and 18.5% for cash advances.

The card also includes an interest free period of up to 50 days on purchases. It is also one of the only card providers not to charge commission on overseas transactions made within the EU.

Call 0800 134 134 or visit www.liverpoolvictoria.co.uk

Most watched Money videos