Good deals with the right cards

No annual fee, or low interest rates? Steve Lodge finds the new credit cards need careful consideration

Discounts of up to pounds 75 off your gas bill are on offer to people who take out the no-annual-fee credit card launched by a new financial arm of British Gas. This week also saw the Co-operative Bank introduce a fee-free card, with an interest rate of just 7.9 per cent, aimed at people who do not pay off their bill at the end of the month - and instead use the account as a way of borrowing.

Each may be attractive to certain types of credit card users; and the moves underline the continuing competition among card issuers and the increasing complexity of the market. Choosing the "best card" among the large number now available will depend on how you use your card - how much you spend and how often you repay your bill in full - and requires looking at more than just headline interest rates.

The new Goldfish card, issued by Goldbrand Development, a joint venture between British Gas and HFC Bank, offers one point for each pound spent on the card. One hundred points will earn a pounds 1 discount on your gas bill; it will also be possible to build points towards other, as yet unspecified, "home essentials".

The maximum gas bill discount via the card will be pounds 75 in any one year. To get this you will need to be a big spender - using the card for a total of pounds 7,500 of purchases - although it will be possible to combine points with other customers such as your partner. You can pay off your bill in full each month while still getting the points and, according to British Gas, using the card does not prevent customers benefiting from other payment discount schemes already offered by the company.

The card has an interest rate of 18.9 per cent - which is relatively high - but no annual fee, making it most attractive to "full-payers". In contrast, the Co-op Bank's Advantage Visa card is aimed specifically at people who use their credit card to borrow. Unlike traditional cards, there is no interest-free period but interest is charged at the very low rate of 7.9 per cent - much lower than the typical bank overdraft or personal loan rate or the interest rate on most credit cards. The rate is guaranteed until next April when it will switch to 10.9 per cent, which is still highly competitive if you regularly use your card to borrow. Again, the card has no annual fee.

The credit card market is still dominated by the main high street banks, with Barclaycard having the most holders. But this year has seen a number of challenges to this situation, in particular from lower-rate cards from United States issuers.

This month's Which? magazine (available in many public libraries) surveys the credit card market for "best buys". The magazine emphasises that a best buy for one user may not be for another. Only one card in its survey is rated a best buy for people who always pay their bill in full every month, those who are permanent borrowers, and people somewhere in between. This is the card issued by one of the US newcomers, People's Bank of Connecticut, which has no annual fee, an APR (annual percentage rate) of 14.4 per cent and the usual interest-free period.

The Which? survey does not include the new Goldfish or Co-operative Bank cards, nor charity-linked cards that are popular among many full-payers and which earn donations for charities such as Amnesty International when you take out the card and as you use it. The survey does, however, include the Consumers Association's own new Which? card, which it rates a best buy for people who pay off their bill in full each month but which is rated less well for those who use it to borrow. Its interest rate of 18.9 per cent (discounted to 13.9 per cent for the first six months) is not as low as some.

If you pay off your bill in full every month, you don't need to worry about the interest rate. For these people Which? recommends a card that charges no annual fee and gives users as long as possible to pay their bills. Since such cards don't cost these users anything, people may be swayed by any perks on offer, such as gas bill discounts, Airmiles or other points-based reward schemes. The Which? card, for example, offers a free legal support service for problems related to purchases using the credit card. The Which? report does not cover these perks but there is a free factsheet available from the Consumers Association (call 01992 822800).

Which? also warns that quoted interest rates (APRs) aren't a good guide to the cost of credit card borrowing as they don't take account of the way card issuers actually charge interest. For example, Which? says most issuers charge interest on purchases from the day they are noted on your account; some, however, charge from the (earlier) date of the purchase or the (later) date of your statement, which is more or less expensive respectively. Such differences are not reflected in quoted APRs, so cards with higher APRs can in fact work out a cheaper means of borrowing.

q Contacts: Goldfish 0345 609060; Co-operative Bank 0800 109000; People's Bank of Connecticut 0500 551055.

Best borrowing rates

Telephone % Rate and Max Fee Incentive Redemption period adv % penalty

MORTGAGES

Fixed rates

Scarborough BS 0800 590547 0.20 for 1 year 85 0.75% - 1st 5 yrs:7.04% of sum repaid

Norwich&P'borough 01733 391497 6.45 for 3 years 85 pounds 295 1st 5 yrs: 6 mths interest

Britannia BS 0800 526350 7.74 for 5 years 95 pounds 295 Unemlpoyment ins- 1st 6 yrs: 180 days interest

Variable rates

Northern Rock BS 0800 591500 0.99 to 1/10/97 90 Refund valn fee 1st 6 yrs: 5% of sum repaid

Principality BS 01222 344188 3.60% to 1/10/98 90 - To 30/9/01: discount reclaimed

Abbey National 0800 555100 5.74 to 31/8/01 95 - Refund valn fee To 31/8/02: Ind determined

First time buyers fixed rates

Alliance & Leic BS via local branch 2.10 to 1/10/97 95 0.5% - To 1/10/01: 6 mths interst

Market Harbro' BS 01858 463244 4.49 to 1/7/98 90 pounds 250 Unemployment ins To 1/7/00: 3 mths interest

Northern Rock BS 0800 591500 7.49 to 1/8/01 95 pounds 295 1st 6yrs: 5% of sum repaid

First time buyers variable rates

Principality BS 01222 344188 1.00 to 1/10/97 90 - - To 30/9/01: discount reclmd

Northern Rock BS 0800 591500 4.24% to 1/10/99 95 pounds 295- Refund valn fee 1st 7 yrs: 5% of sum repaid

Halifax BS 0800 101110 5.43 to 30/9/01 90 - pounds 300 & free valn To 30/9/03: 1-4% of advance

PERSONAL LOANS

Telephone APR Fixed monthly payments (pounds 3,000 over 3 years)

Unsecured With insurance Without insurance

Direct Line 0141 248 9966 13.90E pounds 112.86 pounds 101.33

Alliance & Leicester 0116 262 6262 14.80 pounds 114.93 pounds 102.36

Midland Bank 0800 180180 14.90 pounds 115.82 pounds 102.49

Secured (second charge) Max LTV Advance Term

Clydesdale Bank 0800 240024 7.50 Neg pounds 3K - pounds 15K 6 mths to 25 years

Royal B of Scotland 0131 523 7023 8.70 70% pounds 2.5K-pounds 100K 3 years to retirement

Barclays Bank 0800 000929 9.3/9.6 80% pounds 10K-75K 5 to 25 years

OVERDRAFTS

Authorised Unauthorised

Telephone Account % pm APR % pm APR

Woolwich BS 0800 400900 Current 0.76 9.5 2.18 29.5

Alliance & Leicester 0500 959595 Alliance 0.76 9.5 2.20 29.8

Abbey National 0500 200500 Current 0.94 11.9 2.18 29.5

CREDIT CARDS

Telephone Card Type Min Rate APR Annual Int. free Income % pm % Fee period

Standard

Co-operative Bank 0800 109000 Advantage Visa - 0.64N 7.90N nil 0 days

Robert Fleming/S&P 0800 829024 MasterCard/Visa 0.8958 11.20 nil 0 days

Midland Bank 01702 353344 MasterCard/Visa - 0.945N 11.90N nilN 56 days

Gold cards

Co-operative Bank 0345 212212 Visa pounds 20,000 0.4792 10.32 pounds 120 46 days

Royal B of Scotland 01702 362890 Visa pounds 20,000 1.05N 14.50N pounds 35 46 days

People's Bank Conn 0500 551055 MaterCard/Visa pounds 20,000 1.13 14.40 nil 56 days

STORE CARDS

Telephone Payment by direct debit Payment by other methods % pm APR % pm APR

John Lewis in store - - 1.39 18.00

Marks and Spencer 01244 681681 1.87 24.80 1.97 26.30

Sears in store 1.94 25.90 2.20 29.80

Best savings rates

INSTANT ACCESS

Portman BS 01202 292444 Instant Access Instant pounds 100 4.50 Year

Co-0perative Bank 0345 252000 Pathfinder Instant pounds 5,000 4.75 Month

Direct Line 0181 667 1121 Instant Savings Instant pounds 50,000 5.50 Year

INSTANT ACCESS POSTAL ACCOUNTS

Teachers' BS 0800 378669 Bullion Postal pounds 500 4.80 Year

Alliance & Leic BS 0645 645660 Instant Direct Postal pounds 5,000 5.40 Year

Bristol & West BS 0800 901109 Instant Acess Postal Postal pounds 10,000 5.85 Year

NOTICE ACCOUNTS & BONDS

Chelsea BS 0800 132351 Post-tel 20 Day 20 day P pounds 5,000 6.05 Year

Cheltenham & Gloucester 0800 717505 Direct 30 30 day P pounds 100 5.50 Year

First National BS 0800 558844 90 Day Notice 90 day P pounds 10,000 6.20 Year

CHEQUE ACCOUNTS

Kleinwort Benson 01202 502404 HICA Instant pounds 2,500 5.00 Month

Halifax BS 01422 335333 Asset Reserve Instant pounds 10,000 4.00 Quarter

Chelsea BS 0800 717515 Classic Postal Instant pounds 10,000 4.35 Year

FIXED RATE BONDS

Bristol & West BS 0800 202121 Year Plus Bond 1/12/97 pounds 5,000 6.25F Maturity

Norwich & Peterborough 01733 391497 Fixed Interest Bond 2 Yr Bond pounds 10,000 6.60F Year

Yorkshire BS 0800 378836 Investment Bond 31/5/99 pounds 2,500 7.20F Year

FIRST TESSAS

Sun Banking Corp 01438 744505 Fixed Rate TESSA 5 years pounds 8,575 7.50F Year

NatWest Bank 0800 200400 Fixed Rate TESSA 5 years pounds 5,000 7.45F Year

Birmingham Midshires 0645 720721 5 years pounds 1,000 7.00 Year

FOLLOW-ON TESSAS

Sun Banking Corp 01438 744505 Fixed Rate TESSA 5 years pounds 9,000 7.50F Year

NatWest Bank 0800 200400 Fixed Rate TESSA 5 years pounds 5,000 7.45F Year

Birmingham Midshires 0645 720721 5 years pounds 1,000 7.00 Year

GUARANTEED INCOME BONDS (net)

Financial Assurance 0181 380 3388 1 year pounds 50,000 4.80FN Year

Pinnacle Insurance 0181 207 9007 2 years pounds 3,000 5.50FN Year

Pinnacle Insurance 0181 207 9007 3 years pounds 3,000 5.80FN Year

OFFSHORE ACCOUNTS (gross)

Newcastle Bank Gibraltar 00 350 76168 Nova Access Instant pounds 25,000 6.30 Year

Derbyshire (IOM) Ltd 01624 663432 90 Day Notice 90 Day pounds 25,000 6.55 Year

Skipton (Guernsey) Ltd 01481 727374 3 Year Bond 30/9/99 pounds 10,000 7.40F Year

NATIONAL SAVINGS ACCOUNTS (gross)

Investment Accounts 1 month pounds 20 4.75 Year

pounds 500 5.25 Year

pounds 25,000 5.50 Year

Income Bonds 3 months pounds 2,000 6.00 Month

pounds 25,000 6.25 Month

Capital Bond Series J 5 years pounds 100 6.65F Maturity

First Option Bonds 12 months pounds 1,000 6.00F Year

pounds 20,000 6.25F Year

Pensioner's G'teed Income Bond Series 3 5 year pounds 500 7.00F Month

NS Certificates (tax-free) 43nd issue 5 year pounds 100 5.35F Maturity

9th Index linked 5 year pounds 100 2.50+rpi Maturity

Children's Bond Issue H 5 year pounds 25 6.75F Maturity