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Be credit card smart

Martyn Hocking (Editor, Which? Money)
17/11/2008

AS living costs skyrocket, it's more important than ever that you get the best possible deal on your credit card - and the difference between the best and the worst can be substantial.

We found that you could save £28 in interest on a £1,000 one-off purchase, paying the debt back over the following six months, and £36 in a year as an `occasional' payer (only paying one in four bills in full) spending £200 a month, by choosing a Best Buy card.

MORE FROM YOUR CARD

The huge choice of credit cards and features can be confusing. Our tips below will help you make sure you are a smart credit card user. .

reason for choosing your main card was that you already had a product with the same company - 26 per cent of you said this was your main reason.

However, we found this is not a good way to get the best deal. For example, of the `big four' current account providers - Barclays, HSBC, Lloyds TSB and NatWest - only one (Barclaycard) is now in our Best Buy tables.

Cashback cards

If you always pay your credit card bill in full each month, as 82 per cent of our members do, you could be better off by using a cashback credit card. While these cards often have relatively high interest rates, so are not good for borrowing, you can get back between 0.5 and 1.5 per cent of what you spend.

The Which? Money Best Buys in this category are the American Express Platinum Cashback Credit Card, Bank of Ireland (UK) Moneyback MasterCard, Barclaycard OnePulse with Cashback Visa, Egg Money MasterCard and Smile Classic Visa.

If you spent £12,000 a year on an Egg Money MasterCard, which gives one per cent cashback, you would earn £120.

Borrowing costs

If you do not pay your balance off in full every month (which applies to 17 per cent of Which? members), you should use a Best Buy card for borrowing.

These are currently the Barclaycard OnePulse with Cashback Visa card, the Barclaycard Simplicity Visa, Co-operative Bank Platinum Fixed Rate Visa and Egg Money MasterCard.

Many cards let you make purchases at zero per cent interest when you first take out the card, so if you are planning a big purchase, take out a Which? Money Best Buy in this category, such as the Marks & Spencer Money MasterCard, which has a zero per cent deal for 10 months.

If you are an occasional payer, you would save £36 in a year, spending £200 a month, using the Egg Money MasterCard, which pays one per cent cashback and charges interest at 12.9 per cent, instead of the Lloyds TSB Airmiles Duo American Express card charging 15.9 per cent.

Spending abroad

Our survey shows that you are more likely to use additional cards than your main card for spending abroad - 45 per cent said they used extra cards for this, compared with 39 per cent for their main card. As most providers charge a foreign exchange loading fee of around 2.75 per cent for overseas spending, it makes sense to have a card to use abroad that doesn't do this. The Which? Money Best Buy cards for spending abroad are the Abbey Zero MasterCard, Thomas Cook Visa, Nationwide Gold Visa and Post Office Platinum MasterCard. The Saga Platinum Visa is a Best Buy too - but only for use within the EU.

You could save around £14 if you use a Best Buy for spending £500 abroad, instead of a card that charges a foreign exchange loading fee of 2.75 per cent.

Credit card cheques

More than half of Which? members have been sent credit card cheques. You should avoid them, because:

you are charged interest at the higher cash advance rate

there is no interest-free period so you are charged interest immediately

you do not get the protection from section 75 of the Consumer Credit Act that you get when you buy with a card. This states that if you buy goods or services for £100 to £30,000, you can claim your money back from either the company or credit card provider if there is a problem.

If you are sent credit card cheques, shred them and ask your provider to stop sending them to you.

Shopping online

In our survey, 78 persr main credit card to shop online. While shopping online can save you a great deal of money, it's important to take steps to protect yourself against fraud:

ensure websites you make payments through have `https' in the address bar and a padlock symbol on screen

don't use your mother's maiden name as a password on websites you need to register on

make sure your computer has up-to-date anti-virus software and a firewall.

Card fraud

According to our survey, 16 per cent of Which? members have experienced fraudulent transactions on their main credit card. To protect yourself from fraud:

shred personal information

shield your Pin when entering it

check your card statements and credit reports regularly

inform your provider immediately if you suspect fraud, so it can cancel your credit cards.

WHAT MEMBERS WANT

The credit card provider you are most satisfied with, according to this year's survey, is John Lewis/Waitrose.

John Lewis/Waitrose and Nationwide were also the top two providers in last year's survey, so are developing a consistent track record for good service. Smile has moved to third.

The worst provider in our survey was Abbey. Other providers that rated poorly are MBNA, Lloyds TSB, Royal Bank of Scotland, Halifax, Bank of Scotland, Barclaycard and Alliance & Leicester.