Choose the right credit card

Credit card companies fill our mailboxes with seductive offers. Choose wisely, Sarah Modlock says, and you can have your cake and eat it.

There are more than 1,300 credit card brands sloshing around in the UK, and with application forms falling out of magazines and dropping through your letter box, there is no shortage of card issuers after your custom. Competition is good news for the consumer and the arrival of American card issuers has prompted the UK market to offer better deals. It may seem as if all credit cards are the same, but choosing the right one could save you money.

If you carry a balance, you will be the best friend of your card issuer because they make their profits from the interest you pay. Luckily for you, there has never been a better time for card tricks which will ensure you pay as little as possible for credit. Switch between issuers to take advantage of interest-free balance transfers. Most last for up to nine months from the date of transfer but you can also find cards offering low balances of about 3% interest for the entire life of the balance. Make sure that the new card also has a competitive APR (annual percentage rate) for ongoing purchases. Finally, close the account for the old card and cut it up so that you will not be tempted to run up more debt.

If you pay off your balance in full every month you can benefit from a cashback credit card. There are more than 40 on offer where, for every pound you spend, the credit card issuer will give you some money back, usually after 12 months. Over special periods such as Christmas, some credit cards have been known to offer double cash back. The value of the percentage can vary depending on issuer. But remember, if you pay your bill late, or carry some credit even for one month, then you may find that the value of the cashback is far outweighed by the cost of interest, especially as the APR on these cards tends to be high.
 

Another way to make your money work harder if you pay off your balance, is to opt for a card with a long interest-free period. With most credit cards, if you go out shopping on the day after you receive your latest statement, then you will not be billed for your purchases until the same time next month and payment will not be due until three to four weeks after that. This can amount to an interest-free period of around 59 days, but it can be as short as 45 days. If you are going to clear your balance each month, then the longer the interest-free period, the better.

Many credit cards come with travel insurance cover of anything from £25,000-£100,000 (or up to £250,000 for gold and platinum cards). But read the small print and do not just assume it will cover you for all destinations and activities or for numerous trips. Depending upon your card issuer, you could enjoy Air Miles, money off utilities or shopping bills, or gift vouchers. But do not be seduced by attractive perks if the card will bleed you dry on interest charges.