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Spend & Save

Money Insider: Cashback offer may not be your best option

the clarity credit card from Halifax is recognised as one of the most attractive "plastic" deals on the market, and this week Halifax launched a promotion where new customers can earn 2 per cent cashback (maximum £60) for balances transferred to this card.

The Clarity product is popular because there are no charges for overseas transactions, cash withdrawals or balance transfer fees, plus all transactions are charged at a typical annual percentage rate (APR) which is a very competitive 12.9 per cent.

While the chance to pocket some cash for switching your balance from another card may look appealing, it may not be quite as good as it first appears, mainly because of the fact there is no introductory interest-free option for balance transfers. I've crunched some numbers just to highlight my point.

If you switched £3,000 to Halifax's card and paid off 5 per cent of the balance on each of your statements for 17 months, you would pay £385.59 in interest at 12.9 per cent. Once you have taken the £60 cashback into the equation your net outlay would be £325.59.

If you were to switch £3,000 to the Barclaycard Platinum credit card, you'd have to pay a 2.9 per cent one-off balance transfer fee of £87 (discounted to £67 up to 28 February) but no interest charges for the first 17 months.

If you're planning on switching an existing £3,000 card debt to Halifax Clarity with a view to clearing the balance in full within the first four months then it is still a viable option. However, if you intend taking more time to clear the balance, then a longer-term 0 per cent balance transfer card is a cheaper option.

ISAs: don't rush in

With a little over 50 days until we cross over into a new tax year, those people who haven't yet made a decision as to where to invest their tax-free cash need to start considering their options. With cash-based ISA savings products, the annual tax-free allowance is £5,100 per person for this tax year, with the 2011-12 increased cash allowance of £5,340 kicking in with effect from 6 April.

We are already starting to see a number of new and quite competitive cash ISA accounts starting to emerge but, with many of the major financial players still yet to reveal their hand, it may be worth hanging on for a few more weeks before making your final decision.

In the meantime, it is worth considering the choices out there and which may be best suited to you, but with a vast array of ISA product variations, you may find following checklist helpful.

* Is the interest rate variable or fixed?

* Does the ISA allow you to transfer in previous years ISA balances?

* Does the interest rate include a bonus? If so, make a diary note to switch when it expires.

* Is the interest on the account paid monthly or annually?

* Is the interest rate available only to existing customers?

* Do you have to purchase another financial product to qualify for this rate?

I will be following up with another look at the ISA market in the middle of next month. In the meantime, here is an idea of some of the best rates out there at the moment,

For an instant-access account with a variable interest rate, you can get 2.85 per cent from Santander or 2.80 per cent from Halifax,

A fixed-rate ISA currently pays 3.10 per cent for one year with Bank of Cyprus UK but you can get 4.30 per cent for a five-year fixed ISA bond from Northern Rock.

Changes to credit card minimum payments

mbna has announced that with effect from April 2011 all existing customers will see a change in the way their minimum monthly repayments are calculated.

In an attempt to cut the time taken to clear credit card borrowing, and to reduce the cost to MBNA customers, the minimum repayment will be set at 1 per cent of the principal balance plus interest and any fees or charges.

This minimum payment structure has been the norm for any new MBNA customers since the summer of 2009, and the lender is now making this consistent across all of it accounts by rolling it out to existing borrowers, too.

For those currently paying only the absolute minimum each month, this will mean having to make a slightly higher monthly repayment. For example, someone with a £2,500 balance at 16.9 per cent APR will have to pay about £20 more a month.

While ultra-low repayments on credit cards may seem attractive to those who are operating on very tight budgets, over the longer term the financial cost can be frightening, so any move to increase the minimum repayment is a welcome and sensible move, even though it may not seem that way to some customers initially.

Andrew Hagger is an analyst at Moneynet.co.uk