- Compare credit cards
- Cash savers
There's more to choosing a credit card than the headline rate. You have to think about what you want the card for and bear in mind that credit is much harder to come by than in the pre-credit crunch days, so don't assume you'll be able to jump from one 0% deal to another.
We take a look at some of the leading cards:
Best for balance transfers
If you have an outstanding debt on a credit or store card, try to move it to a card with a lower rate of interest. Your credit score is very important, because unless you have a good credit rating you won't qualify for the leading deals.
If you do have a good credit history, the Virgin Credit Card is the pick of the bunch. It offers a 16-month interest free period on balance transfers, giving you a good length of time to clear that debt. You will be charged a transfer fee of 2.98% which will be added to your balance.
It is important to clear the outstanding debt during the 0% period because once it ends you will be charged the standard rate of interest which is 18.6% for balance transfers.
Best for purchases
One of the reasons you may be wanting a new credit card is if you have a large expense which you can't afford to pay for all in one go - maybe you're getting married or need to buy a big ticket item such as furniture or white goods for your home. A credit card can be great in this situation as it enables you to spread the cost over a number of months.
The Tesco Clubcard Credit Card has a 12-month interest-free period on purchases, giving you a year to pay them off. You should aim to clear the debt within that time because once the 0% offer has ended you'll incur interest at the standard rate of 16.9%.
This card is also good for rewards as you earn Clubcard points each time you spend: five points for every £4.00 spent in Tesco and one point for every £4.00 spent elsewhere.
Best for purchases and balance transfers
Most card providers employ a payment hierarchy whereby the cheapest debt is cleared first. Therefore, if you want a card to spend on as well as transfer a balance onto, you need a card offering equal 0% periods on transfers and purchases.
Because of the way most card providers allocate repayments ie. clear balance transfers/the cheapest debt first you need a card offering equal 0% periods on transfers and purchases if you are looking for a credit card for dual purposes.
The leader in this area is the Halifax All In One Card - it has a nine month interest-free period on both balance transfers and purchases. The standard rate of interest, which is what you'll be charged once the introductory offer ends, is 15.9%.
Best long-term deal
The key with credit cards that offer interest-free periods is to clear your debt during that time. If you won't be able to a card that offers a low, standard rate of interest could prove better long term value.
Many savvy credit card users have been taking advantage of 0% deals by moving their debt from one deal to another, once the interest-free period ends. However, you can no longer rely on being able to do this because card providers are sharing more information about customers - not only are they looking for good quality customers, they're also looking for people they'll make money from. If all you've been doing is hopping from one 0% deal to another you aren't a profitable customer and therefore even if you have an exemplary credit history, you may find your application is turned down next time you apply for a new card.
Again, in this situation, a card that offers a low-standard rate could be the best option.
Barclaycard Simplicity is the market-leader. It has a rate of 6.8% on purchases and balance transfers. What's more, unlike most 0% offers, there is no fee if you transfer a balance from another card.
Best for rewards
Around half of all credit card customers clear their balance in full each month. If you are one of these people 0% deals are pointless because you won't pay interest anyway.
A better option is to go for a card that rewards you each time you use it. The American Express Platinum Cashback credit card is the most generous. It pays 5.0% cashback during the first three months up to a maximum spend of £2,000. This means you could earn £100 just for spending on your card.
You continue to earn cashback once the introductory offer has ended, albeit at a lower rate: 0.5% on the next £3,500 spent on the card; 1.0% on spending between £3,500 and £7,500 and 1.25% on spending above £7,500.
A cashback or rewards card is only suitable if you clear your balance in full each month. If you don't, the interest you'll be charged will be greater than the value of the cashback. The Amex card, for example, charges an annual interest rate of 19.9%.
Best if you have an imperfect credit history
Whether you're wanting a mortgage, loan or even a mobile phone contract, your credit score is important. Lenders have become much more cautious about who they will lend to so if you've fallen behind with credit card or loan repayments in the past you are unlikely to qualify for any of the leading deals.
Similarly, if you have no credit history you may find it hard to get accepted.
However, there are a number of credit cards available to those with less-than-perfect credit profiles. Opting for such a deal can be a great way of rebuilding and improving your credit score.
You will be charged a much higher rate of interest though, so should really see these cards as a credit-building vehicle, rather than a borrowing facility - always clear your balance in full each month. Once you have proved you can manage credit responsibly, you'll have a greater chance of being accepted for a more competitively-priced product.
Capital One's Classic Card is aimed at those needing to strengthen their credit rating. The standard interest rate is 34.9%, so this is definitely not a card to owe money on.
For other tips on boosting your credit rating see 'How to improve your credit score'.
