There's something powerful about wielding a credit card. As the tagline goes, the possibilities are endless, especially with access to the kind of funds that dwarf most of our everyday budgets. But having a piece of gleaming plastic in your wallet isn’t just a matter of deciding how to splash your cash.
While many debt free die-hards consider them the devil’s best weapon in driving you into insurmountable debt (indeed around 18m people received a default notice on their credit card bill last year), used properly, they could help manage your finances better thanks to interest free periods and balance transfer offers that operate like an interest free loan as long as you play by the rules.
Meanwhile, buying something with a credit card can afford you more protection than buying using a debit card or cash. Some credit cards are even designed to help those with bad credit to improve their credit rating, helping open the door to a whole range of other financial products they may not have otherwise been eligible for.
But this jargon-heavy market is swamped with a dizzying array of credit card deals. The good news is that those deals have never been so generous. So where on earth do you start?
Credit cards explained
Long gone are the days of simply using a credit card to buy goods and services. Now, it’s all about working out the best credit card deals for your personal circumstances and needs. The best way to do a credit card comparison is to decide what you want from the offer and work backwards.
If dipping your toe into the credit card pool is about funding a specific purchase, you need a card offering the longest 0% interest period on new purchases, giving you the longest time to pay off those expensive one-offs.
And that period can be two years or more. The Halifax Longest Purchase Offer does what it says on the tin with the best deal on new purchases currently on the market. The card gives account holders a significant 30 month interest free window to spend as they see fit, followed by interest charges of 18.9%.
It's a deal the AA matches with its Dual Credit Card.
Coming a close joint second are MBNA's All Round Credit Card and Sainsbury's Nectar Purchase credit card, both offering a 29 month interest free period on new purchases followed by 18.9% and 18.95% respectively if you hit the shops after that period.
Unusually though, with a 29 month chance to pay off balance transfers too, the MBNA card is a compelling deal across both new purchase and balance transfer offers. (Though it will cost you 2.95% in transfer fees and a 20.9% interest rate after the offer period.)
As long as the balance is paid off by the end of the period, these cards stack up against the best of the interest free finance or purchase loans you’d find on the high street - from furniture or electrical retailers for example.
The watchwords here are ‘paid off’ though, and if you think it’s unlikely that you’d clear the debts even over two and a half years, you are probably better off seeking out the best long term low rate deal, currently MBNA’s 60 month offer at 4.9% interest with a low fee of 0.5%.
Best credit card rewards and cashback cards
And that’s not all. Big spenders who religiously pay off their balance either every month or at least by the end of the interest free period could be quids in by opting for a credit card that offers the best cashback deal or the best credit card rewards.
If it’s cash you’re looking for, Amex tops the cash back credit card offers with 5% cashback for purchases in the first three months, and up to 1% after that.
But if your rewards of choice don’t need to be all about the money in your pocket and can be more specific, such as Nectar points or M&S vouchers, they can be worth more than the cash return on your credit card spending.
For the best credit card rewards, M&S shoppers should plump for the M&S Bank’s credit card deal, offering 5 times the reward points if you spend in M&S, plus a bonus voucher when you set up the card. Sainsbury's, John Lewis/Waitrose, Asda and Tesco Bank credit cards operate on much the same premise, so your weekly shop could start giving you something back if you select wisely.
And for jetsetters who are really on top of their credit card repayments (and won’t get hit by astronomical interest rates) and are prepared to stomach the significant annual fees involved, you’d be hard-pushed to beat the Amex partnership with British Airways and Avios that could give you enough points for 2 short-haul flights when you spend £2,000 on your card.
There's also the latest Amex Gold card deal to consider, offering £100 of vouchers for every £2,000 you spend.
With all these reward or cashback cards, maximising your rewards is all about spending big but paying the balance back in full. If not, the interest and fees very quickly outweigh those rewards.
Best balance transfer cards
But what if you’ve already run up the debts and come to the end of your 0% interest deal? Then it’s all about transferring the balance for as low a fee as possible, usually with the longest window of opportunity to pay it off.
If you think you’ve a good chance of paying off a significant balance relatively promptly, the best balance transfer credit card with no fee is currently from Halifax, with no transfer costs and a generous 26 months to pay off that debt.
If it may take you a little longer, MBNA tops the longer term balance transfer credit card deals with its 43 month interest free window, plus £20 cashback, though it comes with an unfortunate 3.29% transfer fee. Though if you can whip your debts into shape a month earlier, its worth plumping for Barclaycard's 42 month deal, also offering £20 cashback but with a fee of only 2.99%.
And if you can pull off clearing your balance within 38 months Barclaycard also comes out on top of the longer-term low fee cards for a far less painful 1.45% transfer fee, and that £20 cashback. Or, with a slightly shorter window of opportunity, its 32 month deal comes in at only 0.63% in fees, again with £20 cashback.
In fact, Halifax is offering a 26 month 0% balance transfer deal for no fee at all.
And what about debts wracked up elsewhere? You can also transfer money debts onto credit cards under the same kind of deals with money transfer credit cards, the best of which are currently Virgin Money’s 32 month interest free offer with its 1.99% transfer fee, or for a longer term, it’s 36 month deal at 2.69%. If you need more time to clear the debt, the best low rate money transfer credit card around right now is yet again MBNA at 4.9 % interest over 60 months for a 0.5% transfer fee.
Best credit cards for bad credit
Credit card eligibility keeps a lot of people awake at night, but there are cards out there serving the same balance and money transfer, new purchase, rewards and cashback needs for those with bad credit.
For new purchases, you could opt for Barclaycard Initial's 3 month 0% offer with up to £40 cashback.
If you’ve run up debts elsewhere and have a financial past, Barclaycard offers an 18 month balance transfer deal at 0% interest for those with a less than perfect credit history at a transfer fee of 2.99% for example.
Nor do previous difficulties necessarily rule you out of the rewards side of the credit card market, though the cashback deals aren't quite as generous as they are for those with a squeaky clean credit score. Here, Aqua’s 0.5% cashback offer is likely to be your best bet.
But no matter what your circumstances, credit card preferences or spending plans, the golden rules are to be realistic about what you can afford to spend and ultimately repay, be disciplined about repayments by setting up a direct debit every month, and remember that credit card providers are out to make money, not solve your financial problems for you.
Always check the small print, especially annual charges, fees, and their rules on the order of repayments. Failing to do so could make the best credit card deal a very expensive affair indeed.
Figures correct on 1st May 2017.