Credit Cards For Crafty Customers

Many credit cards are very specialised and do only one job well. Nevertheless, one of these Best Buys will make you happy.

When doing a particular job, use the tool best suited to that job. For example, don't use a Frenchman* to remove wallpaper; likewise, don't use a screwdriver to hammer in a nail. The same goes for your personal finances: don't choose a personal loan when a credit card would work better, and don't get a secured loan when a remortgage would be the wiser option.

Of course, thanks to the ever-increasing complexity of the financial-services minefield, choosing the right money-management tool is a tall order. For example, with around 1,300 differently branded credit cards from which to choose, finding your perfect plastic is a tough task. So, to make life easier, I shall describe four scenarios and the ideal credit cards for each of these situations:

1.    Interest-bearing debts on other cards?

A typical credit card charges interest on purchases of around 16.5% APR, which is more than three times the Bank of England's base rate, currently 5% a year. Store-card rates are even higher, with interest racking up at an average of 24.3% a year, or nearly five times base rate!

If you are paying interest on existing card debts, then it makes sense to transfer these balances to a 0% balance transfer credit card. As the name suggests, these cards charge no interest on transferred balances for an introductory period. However, they do charge a fee of up to 3% of the value of each transfer. In effect, you're paying an upfront charge in return for enjoying a breather from interest lasting up to fifteen months.

According to the Fool's independent, unbiased search engine, these are the longest of the 102 0% balance transfers on offer. Pick one of these beauties and you can forget about interest until late 2009:

2.    A major purchase in mind?

My next deck of cards is best suited to individuals who have a major purchase in the pipeline. Rather than dipping into your savings or paying interest on this transaction, using the right credit card can give you extended interest-free credit. Indeed, by using a 0% on new purchases card, you can dodge interest on this spending for a year or more.

According to our search engine, these are the longest of 89 different 0% deals:

3.    Always pay your monthly bill in full?

If, like me, you always pay off your monthly bill in full, then you can earn as you spend with a cashback credit card. For anyone spending £300 a month on plastic, these are the highest payers from a dozen different cashback cards:

Note that many cashback deals aren't so hot after the first year, so do shop around each year in order to be sure that you're getting the best deal.

4.    Often use your card overseas?

Finally, let's say that you're one of those lucky people who see a lot of the world and do plenty of travelling. If you spend a lot overseas on your credit card (or frequently buy from foreign websites), then choose a card which doesn't charge a fat fee for converting foreign currencies into sterling. These are the only five cards in this category:

So, there you have it: four different needs met by a quartet of different card types. It's perfect plastic all round!

* This isn't a Francophobic comment: a Frenchman is a knife-shaped tool with a hooked tip used for pointing brickwork.

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