Get the perfect credit card

Rachel Robson reveals which market-leading credit card is the perfect credit card for you.

Let's face it, credit cards are pretty handy pieces of plastic to have in our wallets. And, according to research from the Post Office, more than 2.6 million credit card users said they intended to spend more on their cards in January 2010 than in 2009. What's more, an increasing number of us planned to use our credit cards for day-to-day spending such as grocery shopping.

Meanwhile, for those of us who have already given our credit cards a good work out, one in five of us reckoned it will take us over a year to pay off our old debts from 2009.

Get it right!

Whether you're planning to spend more on your credit card this year, or you simply want to get rid of your credit card debt, it's really important to make sure you're using the right credit card. So let's take a look at which credit card is the best one to use in certain situations.  

Combating your debt

Let's take my friend Sam. Over Christmas, Sam managed to rack up a debt of £2,000 on his credit card. This card has an interest rate of 16.9% - so the interest is stacking up pretty fast.

However, if Sam transferred his debt over to a 0% balance transfer card instead, he wouldn't have to worry about paying any interest on his debt for a year or more. The Virgin Credit Card, for example, offers a market-leading interest-free period for 16 months. So that means Sam has 16 months in which to start tackling his debt head-on, without worrying about the interest building up.

That said, unfortunately Sam will still have to pay a transfer fee of 2.98% when he transfers his balance across to the Virgin Credit Card - so in his case, this will work out to be just under £60.

However, providing Sam can afford to put £128.73 towards his credit card debt of £2,059.60 (including the transfer fee) each month, he will clear his debt within that 16-month interest-free period. This is important if Sam wants to avoid being hit with an interest rate of 16.6% once the interest-free period expires.

Alternatively, he could go for the Barclaycard Platinum card, which offers 0% on balance transfers for 15 months. Although the interest-free period is shorter than the Virgin Card, Barclaycard offer a pre-application check, so if you're rejected you know you won't get a nasty mark on your credit record. Plus, it's not issued by MBNA, unlike the Virgin card. Find out why the card issuer can be a problem.

If Sam is unable to clear his debt at the end of the 0% period, his best bet is to transfer the debt across to another 0% balance transfer card at that point - but again, he will have to pay a transfer fee.

Alternatively, if Sam's debt was even greater and it was likely to take him a long time to pay off, he could consider a lifetime balance transfer credit card instead. The MBNA Platinum Credit Card Visa, for example, offers a fixed interest rate of 5.9% which will last until Sam has paid his debt off in full. This comes with a transfer fee of 2%.

If you're struggling with credit card debt, don't forget that there are many ways lovemoney.com can help. First, adopt this goal: Pay off credit card debts. Next, watch this video: The cost of credit card debt. Finally, why not have a wander over to Q&A and ask other lovemoney.com members for advice?

Happy spending

My cousin Jill is off on holiday soon - she's planning a month's holiday in Australia. She's pretty excited but she knows it's going to be very expensive, so that means her credit card is going to come in pretty handy.

But rather than simply using the credit card she's had for years, Jill should ensure she uses a 0% on new purchases credit card. That's because these nifty pieces of plastic won't charge you interest on any purchases you make for up to a year.

For example, the Tesco Clubcard Credit Card offers a market-leading interest-free period of 12 months on all new purchases. So Jill could pay for her trip Down Under, knowing that she won't have to worry about racking up huge amounts of interest.

That said, Jill should try to pay off her holiday in full before the first year is up - otherwise, she'll be hit with an interest rate of 16.9%. If Jill is unable to do this, she should transfer the debt to a 0% balance transfer card.

The best of both

One thing I haven't mentioned here is negative order of payment. This is a nasty trick adopted by the majority of credit card providers and means that any payments you make on your credit card will go towards your cheapest debt first, while the most expensive debt will be paid off last.

The best way to avoid this is to ensure you use one credit card for balance transfers, and a separate one for purchases. However, there is another way - and that's by opting for a credit card which offers an equal interest-free period for balance transfers and purchases.

Right now, the market-leading credit card for this is the Sainsbury's Finance Mastercard which offers a 10-month interest-free period on both balance transfers and purchases! This comes with a balance transfer fee of 3%.

Getting cashback

Finally, let's take a look at my friend Michelle. Michelle is a bit of a shopaholic - there's nothing she loves more than hitting the high street and spending her hard-earned cash.

However, she always manages to pay off her credit card bill in full each month - which is great. But she's not being rewarded for her efforts.

Michelle would be far better off using a cashback credit card because she would earn money back every time she made a purchase with it. For example, she could consider the American Express Platinum Cashback Credit Card which offers 5% cashback for the first three months (up to £100 cashback). After that she can earn 0.5% to 1.25% cashback, depending on how much she spends.

The only downside to the American Express Platinum Cashback Credit Card is that American Express isn't accepted everywhere. And Michelle should ensure she always pays off her bill in full each month - otherwise she will be hit with an interest rate of 19.9%.

Alternatively, Michelle could try the Egg Money MasterCard which offers 1% cashback - but she will need to pay a fee of £1 a month and no cashback will be paid on amounts less that £5. You can read more about both of these credit cards in Top reward and cashback cards.

More: The best credit card in Britain | The most loved credit cards in Britain