 |
 |
By Justin Schamotta
Staff Writer
Friday, 16 October 2009
First published 9 October 2009
|
How to Make Your Plastic Work Harder
Our Top Credit Cards to Compare:
Related Money Guides
See our other recent related stories:
Avoid Credit Card Fraud
Find out what precautions you should be taking in order to protect yourself against credit card fraud.
Loan or Credit Card: How Should I Borrow
Borrow better and navigate through the world of interest payments, APRs and credit checks with confidence by reading our guide to loans and credit cards.
The Balancing Act: How to use Balance Transfer Credit Cards
Neil Hawkins compares the balance transfer credit card deals to help you choose the right credit card and sidestep any potential hazards! Helping you to switch any high interest rate debts onto 0% or low rate for life credit card offers.
|
In this ferocious economic climate, many cardholders may feel confused and more than a little suspicious of the many offers being made by rival firms. But, as ever, with a little common sense and knowledge the consumer can still prevail.
Two of the most well known are the cash back credit card and the 0% interest credit card. Both can save - and may even earn - the cardholder money.
If you've ever missed a monthly payment then avoid the cash back cards and consider those with an initial 0% interest offer on purchases instead. Those in debt should avoid credit cards altogether.
Used correctly, credit cards are also cheaper than loans. Therefore, a large planned purchase, such as you might have to make in the unavoidable approach of Christmas, can be paid back cheaply as long as a strict self-imposed repayment plan is adhered to.
Stoozers and Credit Card Tarts
Since Egg introduced the 0% purchases card in 2000, two terms have found their way into the financial lexicon: "stoozing" and "credit card tarting".
The former refers to the act of making money by making purchases on a credit card at an interest rate of 0%.
While spending on the credit card, the cash that the cardholder would have spent is placed in a high-interest savings account to build up interest. The borrower (or "stoozer") then pays credit card bill off before the 0% period ends and collects the interest from their savings.
Credit card "tarts", on the other hand, are those who flit from one interest-free deal to another to ensure the minimum possible cost for their debts.
This is by far the cheapest way to use credit cards but it takes discipline and a good credit score.
Even then, it's a tricky game as banks now have data-sharing arrangements which means credit card companies are able to check how much interest credit card holders have paid back in the past and, therefore, how much money they're likely to make the new provider.
The Best 0% Interest Credit Card
Despite banks' attempts to root out tarts and stoozers, though, some still feel obliged to offer the 0% credit card as an irresistible incentive.
The best of these in terms of length is Tesco's Clubcard Credit Card, which offers 12 months interest free on new borrowing, followed by 16.9% APR.
Also offering long 0% rates on purchases are theHalifax All in One and the Bank of Scotland credit cards which both offer 9 months interest free.
Also worth looking out for are rewards which you can get when making your interest free purchases with the credit cards.
For example, with the Virgin credit card which offers three months with 0% on purchases you can get exclusive discounts on Virgin Media, Virgin Holidays and Virgin Wines. While with the Tesco credit card - and with similar credit cards from Marks & Spencer & Sainsbury's - you can collect Clubcard, Nectar and M&S loyalty points.
The Best Cash Back Credit Cards
Cash back credit cards work on the basis of consumers receiving a payout based on the amount they have spent on their card - the standard being 0.5% (50p per £100 spent).
They generally carry higher interest rates than the lowest-rate cards that don't pay rewards and can also tempt some consumers to spend more than they should.
Cardholders carrying a balance will pay interest charges that could negate any possible rewards. To avoid this, always set up a direct debit to pay the card off in full each month. Once this is done, the card should be used for all normal spending as it effectively pays every time it is used.
Households with over £30,000 income and which spend over £3,000 per year need look no further than The American Express Platinum Moneyback card. It pays a substantial 5% cashback for the first three months (£5 for every £100 spent) up to a maximum £100 cashback earned.
However, after the close of its year's introductory offer, it loses out to Barclaycard's Cashback Card and the Egg Money Mastercard. The former should be the choice for households spending under £5,000. It offers 1% cashback up to £2,000 yearly spend, then 0.5% above that figure.
The Egg Money Mastercard offers a flat 1% cashback on everything bought, up to a maximum of £200 cashback a year. The fact that it charges a monthly fee of £1 makes it only viable for those intending to spend above £5,000 a year.
 Compare Credit Cards
More Credit Card Guides
|
