Credit cards are riddled with small print that can easily catch out the unsuspecting customer - providers know that few people actually read the terms and conditions.
The key is identifying the type of card that will be most suitable for your needs. So don't just sign up for the first card you see, or be lured in by a card that, at first sight, appears to be a great deal. Instead, think about how you'll use the card.
To make things easier for you, we've identified the cream of the crop, so that once you've worked out what type of credit card you need you can apply for the best deal.
Best for spending on
If you want to buy something which you won't be able to pay for in one go, or have got an expensive few months ahead, perhaps you've just moved home or are planning a wedding, a purchase card is what you need.
If you use a credit card you must pay some money off the balance each month. If you don't pay off the entire amount you'll be charged interest.
However, some cards offer interest-free periods on purchases. This is what you want if you are looking for a credit card to help you spread the cost of a paying for something.
Our pick of the bunch it the Tesco Clubcard Credit Card. It has a 13 month 0% offer on purchases.
On top of this, the card also doubles as a Clubcard, so you can earn points every time you spend on the card - for every £1 spent in a Tesco store you will receive two Clubcard points and one point per £4 spent elsewhere.
There are a few things to bear in mind, however. One is that when the 0% period ends you'll be charged the standard rate of interest of at least 16.9% so aim to clear you balance by the time the interest free period ends (It could be higher, depending on your credit score).
And don't use this card for a balance transfer. As well as the 0% offer on purchases, there is an interest free period on balance transfers, but it only lasts for nine months, after which time you'll start being charged interest at a rate of between 18.3% and 24.9%.
Best for transferring a balance onto
If you want to reduce the cost of any outstanding credit card debts and get them cleared more quickly, then a balance transfer card is a great way of doing so. The 0% periods on the leading deals are longer than you get with a purchase card.
The current market leader is the NatWest Platinum Card which offers 16 months interest free on balance transfers. You'll be charged a transfer fee of 2.9%.
Make sure that you try to pay off your outstanding balance during the 16 month 0% period, because once it ends the rate of interest will leap to 16.9% (15.9% if you're an Advantage Gold customer).
If you use this card to make a balance transfer, don't spend on it too. Purchases are only interest free for the first three months - you'll then be charged the standard rate (typically 16.9%) on any spending you've done. And because of the way your monthly payments are allocated, they'll go towards clearing the 0% balance transfer debt first so you won't actually start paying off your purchases until that has been cleared.
Best for spending AND transferring a balance onto
There are some cards that work well if you want to benefit from an interest-free period on both balance transfers and purchases. The key here is to look for a card where the 0% periods end at the same time.
A great option is the Barclaycard Platinum with Purchase. Balance transfers and purchases are interest free for 12 months. You'll be charged a 2.9% balance transfer fee.
As is always the case, you should aim to pay your debt off during the interest-free period. Once it ends you'll be charged interest at 16.9%.
There are a few other things worth pointing out about Barclaycard. You'll qualify for Barclaycard Freedom, which is its reward scheme, and when you spend on your card at certain retailers, you'll earn 'Reward Money'. The money you accumulate can then be deducted from the cost of a purchase or you can keep saving it until you've got enough to buy something outright with it.
Barclaycards are also contactless, which means you can make purchases up to £15 without inputting your PIN. Not all retailers accept contactless yet - you need to look out for the 'wave' sign on payment terminals (you'll see this sign on the front of your credit card so you'll know what to watch out for).
Best if you clear your balance in full each month
Around 50% of all credit card holders pay their bill off in full each month. If you're one of these people, then you don't need a 0% card, as you won't pay interest anyway. Instead, go for a card that pays you!
The leader in this arena is the American Express Platinum Cashback. You receive 5% cashback for the first three months, although the maximum you can earn at this rate is £100 (to get that you'd need to spend £2,000 on the card). You then earn 0.5% on the next £3,500, 1.0% on spending between £3,501 and £7,000, and 1.25% above £7,000.
The main thing with cashback and reward cards is that they only suit those who religiously clear their balance in full each month. If you don't the amount of interest you'll be charged will far outweigh the value of the cashback. The American Express Platinum card has an annual percentage rate of 19.9%.
Best for travel
Most credit cards will charge you extra if you use them abroad. You'll typically pay between 2.5% and 3.0% each time you make a transaction. This means a £100 purchase will cost between £102.50 and £103, so these charges can really add up over the course of a holiday. Not all cards charge for overseas usage though, so if you head abroad on holiday every year, or are a regular traveller, it's well worth taking one out.
The new Halifax Clarity Card is the best on the market. It doesn't levy any charges for use abroad and the interest rate is 12.9%, which is much lower than the average APR.
Best if you have a bad credit score or no credit history
There's no point in applying for any of the cards above if you've had problems managing credit in the past or have never had a credit card or loan before, as you won't be accepted for them. However, that doesn't mean you can't get a credit card.
Some cards are specifically aimed at those with less than perfect credit histories and they can be a great way to help rebuild your credit score.
A card such as Barclaycard Initial could be the ideal starting block if you want to enhance or improve your score.
The interest rate is high though at 29.9%, so the key thing with this type of card is to pay your balance in full each month and make sure you always pay on time. If you are late with a payment it will just make your credit score worse.
Use this type of card for 12 months or so and if you can show that you can manage your money well, it will improve your chance of being accepted for a more competitive deal in the future.
10 top tips for careful credit cardholders
- Repay the card in full if possible to avoid paying any interest
- Set up a direct debit for the minimum repayment so that you never forget
- Repay more than the minimum or you will pay a fortune in interest
- If you have more than one credit card then repay the most expensive debt first
- Never go over your credit limit or you'll pay a fee and your card may be blocked
- Fix your credit score before you apply - get hold of your credit file to see where you can improve
- Transfer your balance to a 0% deal to cut the amount of interest you pay
- Don't use your balance transfer card to spend with - you could end up paying more interest overall
- Use the right credit card when you're abroad so that you aren't hit with fees and charges
- Never use your credit card to withdraw cash, you'll be stung by higher interest and usually a fee
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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