Credit cards, bank accounts, cashback: the smartest ways to spend, borrow and save

From credit cards to current accounts, we highlight the best options whether you are looking to spend, borrow or save.

The last few years have been a bit torrid for all of us when it comes to our finances, but there is an opportunity to get our money in a better position overall.

Working out how to do that means looking carefully at how you borrow, save and spend, and we have run through some of the smartest options today.

1. The smartest ways to borrow

Credit cards are a great option if you’re looking to borrow, so long as you manage them sensibly.

If you’ve got a big purchase on the way then a credit card offering 0% interest on purchases is a smart move ‒ you can then spread payments over a longer period, with every penny going towards reducing your debt rather than on interest payments.

Right now you can get 21 months of 0% interest with the Barclaycard Platinum Visa.

An alternative option is to use a balance transfer credit card.

As the name suggests you transfer a balance from your existing card onto the new card, and again benefit from a lengthy 0% period.

For example, at the time of writing the longest interest-free deal is 29 months from Virgin.

The additional factor to bear in mind, however, is that you will usually be charged a transfer fee of a percentage of the balance being moved.

For example, with the Virgin Money Balance Transfer Credit Card there’s a transfer fee of 3.45%. 

However, there are fee-free options which come with shorter interest-free periods. NatWest for example has a fee-free card with a 13-month 0% period.

Have a gander at our guides to the best 0% purchase, longest 0% balance transfer and fee-free balance transfer credit cards.

For smaller sums, it might be easier to rely on an overdraft. Some accounts offer fee-free overdrafts, even if only for a year or so.

We have run through the best current accounts for those needing an overdraft.

But there will be times when you need bigger amounts than you get from a credit card. A personal loan is unsecured ‒ the interest rates are a little higher, but you don’t have to put any collateral down.

As you'll see in our roundup of the cheapest loan rates, you could borrow larger sums from 6.1%.

Alternatively, you could use a secured loan, and put that borrowing against something like your property.

The rates will be lower but obviously, there is a big downside in that the asset is at risk if you fall behind with your payments.

2. The smartest ways to save

It’s important for savers to move quickly at the moment, given savings providers are swiftly cutting back the rates on offer for their best deals.

In fact, Moneyfacts reckon that December saw the biggest month-on-month cut to rates on savings bonds in a decade and a half.

The right savings deal for you will vary on your circumstances and history though.

If you are just getting started with building a savings pot then a regular saver makes a lot of sense.

These accounts offer high rates of interest, but have strict rules around how much you can save into them each month.

What’s more, paying in each month is required ‒ essentially these accounts are perfect if you can set aside £100 or so every month to build a savings safety net.

Right now the best regular saver pays 8% with Principality Building Society, which is a six-month account.

Once you have some money in savings set aside then you will want to keep some in an easy access account, so that you can turn to that money in an emergency.

The top rate right now is 5% from Chip, with its account offering a maximum of three withdrawals a year.

For savers with more significant sums set aside, it’s a good idea to split the cash.

Some needs to be kept in account which offers swift access, but if you don’t need the rest immediately then it can make sense to lock it away in a fixed-rate bond.

For a long time, the golden rule was that you'd get a better rate the longer the term of the bond. But with the Base Rate widely expected to keep falling over the coming months and years, the reverse is true these days meaning the best rates are reserved for fixed accounts with terms of one year or less.

For example, you can currently get 5% on a six-month bond from Al Rayan Bank, while the best five-year deals currently pays 4.38% (from Smartsave).

It’s also worth remembering the importance of using ISAs. These accounts allow you to keep every penny you earn in interest, which has become more important as rates have risen. 

Most of us enjoy a personal savings allowance of up to £1,000 a year in interest, depending on your Income Tax band.

Anything you earn above that point is subject to tax, and passing that level has become easier as rates have grown.

You can avoid that though by utilising your ISA allowance, since returns are out of the grasp of the taxman.

Check out our guide to the highest-paying savings accounts.

Manage all your savings accounts in one place with Raisin, the simple savings service

3. The smartest ways to spend

If you need to spend money, without having to borrow, then it’s important to identify ways that you can get a little something back.

You might not be able to avoid spending that cash, but earning some rewards along the way makes the whole thing more palatable.

In some cases this will come down to habits. If you are shopping online then it’s an excellent idea to always go via the tracked links on a cashback website.

The money you spend with your chosen retailer is monitored, and then you get a percentage back in the form of cashback.

Those sums might seem relatively modest on the face of it ‒ a couple of percent here and there ‒ but over time they really add up.

Quidco and TopCashback both reckon members take home an average of around £300 a year, simply by being disciplined and always shopping via the site when spending online.

We’ve run through the best cashback websites.

The way that you pay is just as important though.

With a cashback credit card you can earn back a slice of what you spend, each and every time you shop, irrespective of whether it’s online or in person, or which retailer you spend with. 

The leading offer right now pays 5% on spending for the first three months, from American Express, followed by up to 1.25%.

Here’s our guide to the top cashback credit cards.

An alternative comes in the form of rewards cards. These credit cards are tied towards specific loyalty schemes, things like Clubcard, Nectar and Avios. 

The idea is that as you spend you earn points, and those points can then be converted into rewards. 

As with cashback credit cards, the more of your spending that you put on these cards, the greater the level of rewards you can earn, though crucially you need to make sure the rewards on offer are something you’re going to use ‒ there’s little point getting an Avios card if you don’t tend to take holidays, for example. 

Perhaps the most important thing to bear in mind here is how vital it is to clear the balance entirely each month.

These rewards cards tend to come with high interest rates, which can quickly erode the value of any rewards you earn.

Check out the top reward credit cards.

If you want to be truly smart, then you can even look at ways to get something back when paying your regular bills like the water bill or Council Tax.

There are now a host of bank accounts which pay cashback on those monthly bills by direct debit.

Check out our run-through of cashback bank accounts for more.