Play a crafty card game to cut the cost of plastic

Follow Barclays' boss and avoid big debts, writes Melanie Bien
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The Independent Online

If credit cards are too expensive for the man who is ultimately responsible for the biggest piece of plastic of them all - Barclaycard - shouldn't everyone be reconsidering what they have in their wallets?

The Commons Treasury Select Committee is currently looking into the credit card market. At last Thursday's meeting, Matt Barrett, chief executive of Barclays Bank, which owns Barclaycard, revealed that he didn't borrow on credit cards because they are "too expensive". He pays his balance off in full every month, but with his £1.7m annual salary, it could be argued that he has no excuse for not doing so.

Chief executives from HBOS, Lloyds TSB, Royal Bank of Scotland and MBNA Europe were hauled in front of the Treasury, along with Mr Barrett, to explain why interest rates on credit cards are so high and so confusing.

Take the NatWest card, for example. This has an annual percentage rate (APR) of 17.4 on purchases. If you withdraw cash from an ATM using your NatWest credit rather than a debit card, you'll be charged an APR of 19.2. And while you are given 56 interest-free days in which to repay the debt you run up on purchases, interest is charged from the day you withdraw cash on your card.

As if that wasn't complicated enough, NatWest is offering a 0 per cent introductory period on balance transfers for the first six months.

NatWest isn't alone; a number of card providers offer complicated deals with penurious rates of interest.

So what's the answer? From next March card providers must supply a fact box with their credit card literature, detailing their interest rates, fees and charges. This should enable customers to see which cards offer the best deal. The Government is also due to publish a White Paper on consumer credit laws.

But in the meantime, you must look out for yourself. If you have a credit card, or are thinking about getting one, take a look at your spending habits. In an ideal world you would clear the balance every month and not incur any interest. If you do this, it doesn't matter what APR the card charges; what is important is the benefits.

A number of providers, including American Express Blue, Egg and Morgan Stanley Dean Witter, offer cashback. This ranges from 0.5 to 2 per cent of your annual spend on the card; at the end of the year you get a cheque from the provider or the amount is automatically credited to your account.

Air Miles are another attraction for consumers, and there are plenty of card pro-viders offering them according to how much you spend.

If you are really smart and don't mind switching cards every few months, you can benefit from cashback and earn interest on the amount you owe. Put it this way: you make your purchases on a card offering cashback. At the end of the month, instead of paying off the balance, you transfer it to a card with an APR of 0 for six months on balance transfers. At the same time, you put the equivalent amount into a high-interest savings account. At the end of the introductory period you pay off the balance with your savings, close the account and take out another card with a 0 per cent introductory offer.

If you are one of those people who don't pay off their balance each month, 0 per cent introductory offers on balance transfers and new purchases are very useful. RBS Advanta, Egg and Nationwide all offer these. Switch your outstanding balance to one of them and you've often got six months' grace to chip away at what you owe, rather than just paying off the interest each month.

If you aren't going to pay back what you owe in six months, it might be worth opting for a card charging a lower APR for the lifetime of the balance transfer. The Capital One Platinum card charges an APR of 4.94 on balance transfers until you pay the debt off.

If you are having trouble managing your credit card debt and owe several thousand pounds that you despair of ever paying off, you could consider taking out a personal loan and getting rid of the credit card altogether. There are plenty of loans offering attractive APRs - Tesco Personal Finance is charging 6.2 per cent if you apply via the internet - and the repayments are structured so that you can be sure you'll have paid back what you owe by a certain date.

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