My Favourite Credit Card

Fool editor Ed Bowsher tells us why he's just applied for a Halifax All in One Mastercard.

This article was first sent to Fools as part of our 'Summer Lolly' email series. 

Today I'm going to have a look at my favourite credit card. I last wrote about credit cards eight months ago -- my article was about how a 0% balance transfer card had helped me clear some debts I'd run up.

Thankfully I don't have any credit card debt these days, and I've been dutifully paying off my credit card bill in full each month. I know that as a good Fool I should continue doing that, but equally I'd like to have a good holiday this year, so I'm tempted to splash out and spend a little more than usual.....

If I spend more than usual on my card, I might not be able to pay off my bill in full for a couple of months. Then I'd be hit by punitive credit card interest rates.

But there is an alternative. I could use a 0% on new purchases credit card. And my favourite  is the Halifax All in One Mastercard. This card will allow me to spend a bit extra and not pay any interest on the resulting credit card debt for ten months.

Now I'm not planning to wait ten months before I pay off my debt, but the card will allow me to spread things out for three or four months and my credit card balance will have been paid off before Christmas.

So that's why I applied for one of these beauties last week.

Another plus point

0% new purchases credit cards have another advantage as well -- assuming you're well organised.

Let's imagine your typical credit card spending is £500 a month and you normally pay off your bill in full.

Then you decide to adopt a new approach and take out a 0% Purchases credit card. You still spend your normal £500 but only pay the 2% minimum monthly payment (£10) to the credit card company.

Being prudent, you still have £490 which you've earmarked to pay off the credit card debt later. You put that sum in a high-interest savings account, say at 6.5%. Over ten months you'd earn £26.39 in interest. Then, after ten months, you take the money out of the savings account and pay off the credit card bill. A nice little earner...

Word of Warning

Be careful though. Don't let your new card tempt you to start a spending spree that will take ages to pay back. Spending a bit extra in the summer is understandable, but it makes no sense to build up a debt burden that will take years to pay off. I've been down that road and it's no fun at all......

You can find a great range of credit cards at The Motley Fool's credit card centre.