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By transferring just £500 to a 0% balance transfer card from a credit or store card charging 23.9% APR, you will save £119.50 in interest over 12 months.

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Credit Cards Guide

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What type of card should I go for, Standard, Gold or Platinum?

 

While carrying a Gold or Platinum card once conferred a certain prestige, these days there is very little difference between them although some credit card companies will insist on charging a fee for a Gold card, for example.

On a rare occasion this so called premier plastic may come with some extra bells and whistles - you might get preferential travel benefits, for example, but the reality is that most adults with sound credit histories on modest incomes can apply for Gold or Platinum cards but will notice little difference compared with standard cards currently on the market.

It’s important to realise that the credit card companies don't just make their money on outstanding balances. Depending on how or where you use your card, you may be hit with unexpected charges, so it's important to read all the terms and conditions of the card before you agree to use it.

This task is now much easier as all credit card providers have to display a summary box on their website and paper applications, these will show you details of all charges and interest rates at a glance.

How are the monthly payments allocated to the total owing?

You might hope that a monthly payment towards an outstanding balance would go towards the oldest charge first, or the highest-interest-rate balance first, but unfortunately in the majority of instances this is not the case. For example, if you have a credit card with a balance transfer rate at 0% and new purchases at 18.9%APR, the monthly payment will go towards the balance transfer first, ensuring that your interest costs grow more quickly. Be sure you understand the small print regarding your payment allocation for your particular card(s) - known as the "payment hierarchy" - before you agree to the terms and conditions.
 
Should I use my credit card when travelling abroad?
Many people have switched from using cumbersome travellers' cheques to simply charging all their holiday expenses and purchases, at least in destinations that widely accept credit cards.
 
Whilst credit cards are certainly a more convenient and safer option than openly carrying cash, they can, in some circumstances, also turn out more expensive. First, don't expect to get bank rates of exchange - the credit card company will add a margin to whatever its own rate is, so you're paying more than you would at the bank.

Another reason people tend to use credit cards abroad is that they can withdraw cash at ATMs with their card; however, cash advances on a credit card are never recommended, either at home or abroad. Almost all cards charge interest on cash advances immediately, so you pay as soon as you withdraw the money, even if you pay your statement balance in full. If you take cash out on your card, not only will you pay interest and a handling fee, but when used abroad, you’ll also be hit with a foreign usage fee which is around 2.75% of the value of your withdrawal. Also, you need to be aware that the interest rate charged for cash transactions on a credit card is usually far higher than the rate charged for purchases.

However, credit cards can offer benefits for travellers. These can range from discounted travel insurance to protection on purchases, fast replacement of lost or stolen cards and general assistance for travel delays.

 
Are individual store cards a better option?
Almost without exception, individual store cards – whether they are for furniture, clothing or electrical goods retailers - are far more expensive than regular credit cards, and should be avoided.

Though they often offer bonuses, such as discounts on initial purchases or 'favoured shopper' discount days, they will have much higher interest rates than a credit card and an outstanding balance on an individual store card can grow quickly with many charging interest rates close to 30% APR.

 

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Last Updated: 11-02-2012