Pick a better credit card

Credit cards can be useful tools - just make sure you've got the one that suits your needs.

With credit cards lurking in most of our wallets it's easy to see why many of us are in debt. Fortunately, the credit crunch has made many of us wake up and try to pay off what we owe.

But not all credit cards are evil, income sapping machines. Used cleverly they can fulfil a useful role, giving us short term credit when we need it. Pay off your balance in full each month and that card could be your friend.

But getting the most from your card depends greatly on having the right plastic pal in your wallet. Let's take a look at the needs of three credit card holders and check out the cards on the market that would be ideal for them.

Tom wants to clear his credit card balance

Tom is 30, single, and owes £5k on his credit card. He's trying to pay it off but with an APR of 16.9% he's finding the interest racks up surprisingly quickly.

Recommended cards?

Well, as Tom is in a good position to pay off his balance he should be looking into how he could stop the debt growing so he can really attack it. And a 0% card for balance transfers could offer him the solution.

Top 0% cards currently on the market include the Virgin Money MasterCard (run by MBNA), offering 0% for 16 months (with a 2.98% fee), and the Santander MasterCard, which is offering 0% for 15 months (subject to a 3% fee).

Now, transferring debt to these cards is not free - with the balance transfer fees Tom will need to pay around £150 for the privilege. But with well over a year to pay off his balance during which time the debt would remain static he could save far more in the long run.

By stashing £321.82 per month away for 16 months (with the Virgin card) Tom would find he could pay off his card in full when the 0% period expires, having benefitted from 16 months of interest free borrowing.

Tom can even use his card to make a little extra cash. He'll need to make sure he pays the minimum payment each month or he'd risk losing his 0% deal - so to ensure that doesn't happen he sets up a monthly direct debit for the minimum amount. But he can put the rest of the money in a savings account where he'd have earned a little interest, too. At the end of the 0% period he can use his savings account to clear the remaining debt on his card in one go.

Sally collects loyalty points

Sally is a different customer altogether. She is 35, married with two children and always clears her credit card balance in full. She's a keen loyalty point collector and would love a card to help her boost her loyalty point balances so she could trade them in for more free treats for the kids.

Recommended cards?

In Sally's case we don't need to waste time looking at APRs or fees, we can simply check out which cards offer the most extras.

As Sally tends to mainly shop in Tesco and Sainsbury's she could do worse that switch to the Tesco Clubcard MasterCard. The current market leader offers the chance to earn 5 Clubcard points for every £4 spent in Tesco, and 1 point for every £4 spent elsewhere (that's on top of the points earned with the Clubcard itself) so she'd soon rack up a healthy balance.

However, what's even better is that the Tesco card also offers 0% for 12 months on new purchases. So if Sally decided to, she could simply make the minimum payment each month during this period (stashing the rest of the balance in a savings account) and simply use this cash to pay off the whole card in a year's time - keeping any interest earned.

It also offers 0% on balance transfers, but only for six months. It is therefore best to use this card for new spending only to avoid experiencing the dreaded negative payment hierarchy (and there are better 0% balance transfer cards on the market).

Alternatively, Sally could opt for the Sainsbury's Finance MasterCard. It too offers the chance to earn loyalty points (for every £1 spent in Sainsbury's you'll earn 2 Nectar points for the first 2 years). However she won't earn any points on spending elsewhere.

Like the Tesco card, the Sainsbury's MasterCard offers 0% on new spending for a slightly less generous 10 months, and you'll get an extra 2 months at 0% on any spending in Sainsbury's.

Plus interestingly, it also offers 0% for 10 months on balance transfers (subject to a 3% fee) meaning that someone with an existing card balance could transfer their debt and also spend on the card during this period without accruing interest (find out more in this article).

John - uses his credit card abroad

Finally, John is also 35, married with one child and travels abroad regularly with work. He always pays off his credit card in full and would like one that has reasonable foreign usage fees.

John has wisely realised that although credit cards are a convenient tool to use abroad, most charge exorbitant loading fees of around 2.75% on every purchase you make abroad. That soon adds up!

Recommended cards?

But there are a few good guy credit cards that don't charge a fee.

The Santander Zero credit card and the Post Office Classic MasterCard don't charge loading fees for purchases made worldwide.

And following closely behind is the Nationwide BS credit card, which charges nothing for EU transactions (1% for those made outside the EU).

Interestingly, the Santander card also does not charge for cash machine withdrawals (although beware - as interest accrues from the minute you take money from an ATM this can be one of the most expensive ways to obtain foreign currency abroad!).

So there you have it - a few examples of credit card users and the cards that would suit them best.

Remember, use a credit card recklessly and you could easily find yourself spiralling into debt.

But choose wisely and your card could provide you with useful breathing space in which to clear your debts, a great way to boost loyalty points or an inexpensive tool to spend abroad with.

Get help from lovemoney.com

If you need to know a bit more about how to use credit cards, we can help.

First, adopt this goal: Pay off your credit cards

Next, watch this video: The 3 worst things you can do with your credit card

And finally, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

Find out more about the Sainsbury's credit card in this video.

Compare credit cards at lovemoney.com

More: Reduce the cost of balance transfer cards | The 10 worst things you can do with a credit card