What type of credit card is best for me?

If you're paying interest on a credit card balance, then shifting the debt to a balance transfer credit card is a great way of avoiding interest. Most people can save up to £364^[1] - and transferring a balance is easier than you think.

Personal finance expert Kara Gammell considers these cards "a great tool for managing and, crucially, paying down debt without interest charges eroding your best efforts."

Be aware that most cards come with a fee (~3% of the transferred balance), so factor that into your calculations. Our credit card interest calculator makes it easy to work out if you could save money by transferring a balance.

Given the average credit limit for a balance transfer is £2500^[2], if you have a lot of debt it might make more sense to consider a debt consolidation loan.

If you have a large purchase to make – perhaps a holiday, electricals, or furniture, it can be advantageous to pay for it with a 0% interest purchase credit card.

These cards offer interest-free spending for a set period – with the best deals on the market allowing you to space your payments for up to 24^[3] months.

Buying expensive items using any credit card also offers the added benefit of purchase protection under Section 75 of the Consumer Credit Act. Under this law, credit card providers are equally liable with retailers if anything goes wrong with your goods or services worth from £100 up to £30,000. It could mean you could claim back the money from your credit card provider if the company you bought from goes bust, for example.

For borrowing larger amounts, such as for weddings or home improvements, it's often better to take out a personal loan.

Credit builder credit cards are a useful tool for building trust with lenders, establishing a regular credit history, and boosting your credit rating if you have a low credit score or a limited credit history.

While nearly half of our enquiries from people aged under 25 are for credit builder cards, they're great for anyone wanting to improve their financial standing with lenders.

These cards are designed for consumers who wouldn’t normally qualify for standard credit cards and generally come with a higher interest rate (24.90%^[4]) and a lower credit limit (£500^[5]) to reflect the higher risk to the lender. But if you use them carefully and repay everything you owe in full and on time each month, you will see your score increase.

Beyond credit cards, there are many other ways to improve your credit score, such as registering on the electoral roll or correcting errors on your credit report.

To check your credit report, you can use our free credit reporting service.

You might have existing card debts that you want to switch to a cheaper card or one with a 0% interest rate for transferred balances – but you also need the card for continued spending. In this case, you should look for a balance transfer and purchase credit card.

The best deals will offer 0% interest for a set period for any transferred card balances and new purchases, but the time frame for each might be different. For example, you could get 24 months interest-free borrowing for balance transfers but only 18 months on new spending.

When comparing deals, try to find the card with the longest 0% interest period for both. Read the small print to be sure you know the details of your card deal before you apply. There may also be a one-off fee, such as 2% or 3% for balance transfers.

A reward credit card or cashback card gives you useful benefits and incentives. For example:

• A shopping or store credit card can offer vouchers or in-store points for your favourite shops when you spend on the card

• An airline credit card can get you airmiles that you can put towards flights as well as access to airport lounges, hotels and car hire

• A cashback credit card can give you cashback for certain spending

Rewards and cashback cards often charge a monthly or annual fee. They also tend to have a high standard APR or interest rate – this is the rate you’ll be charged if you don’t clear your balance in full each month. It means that to make the benefits and rewards really add up you’ll need to be sure they will outweigh any interest or charges you might pay on the card.

Most credit cards apply foreign usage charges which can add considerably to the cost of using your card abroad. But with a travel credit card these fees are lower – or in some cases there is no fee for overseas use, meaning they can be a cost-effective way to manage your holiday spending and protect purchases made under Section 75.

However, be wary of exceeding your credit limit or making late payments, as this will still result in a fee.

If you need a short-term cash loan a money transfer credit card could help plug the gap. They work in a similar way to balance transfer credit cards, but instead of transferring an existing credit card balance you can transfer money from the money transfer card directly into your bank account. This money can then be used to pay an emergency bill, pay off an overdraft, or other high-interest debt.

Money transfer cards tend to come with a low or even 0% interest rate for a set period – so it could essentially be a short-term interest free loan.

Remember you’ll still need to repay the minimum monthly repayment required on the card, and after the low or 0% interest period ends the interest rate will usually increase to a much higher rate. So aim to pay off the debt before the offer period ends.