The six best credit cards

There are four main types of credit card for four types of borrower:

Balance-transfer cards for people who have existing debts and want to reduce the interest they’re paying.

Purchases cards for people who want to make larger purchases and pay off the cost interest free over the following months.

Overseas-spending cards for people who are looking for cheaper ways to spend and get foreign currency abroad.

Cashback cards for people who don’t need to borrow but would like to earn some extra cash whenever they make purchases, and who pay off their credit card every month.

There are other credit cards, but for the most part they’re never as good as these four types.

Today, I’m going to tell you the best three purchases cards and the best three cashback cards that are currently available to new applicants. I’ll write up the other two types of card in the not-too-distant future.

Because they starts with a ‘p’, or because they’re first in my list, or perhaps for no reason whatsoever, I’ll start with purchases cards:

The top three purchases cards

These deals are all interest-free, 0%, for the length of the deal, and come with 3% transfer fees (or 2.9%, but let’s not quibble over tiny fractions). As always, all of them are extraordinarily expensive after the deal expires (15%APR+) so you need a plan for your remaining debt when you come towards 10 or 11 months.

To qualify for the Sainsbury's Finance Mastercard, bear in mind you must already have a Nectar card and have had it swiped in the last six months. But a Nectar card is free to get and easy to apply for. And it's worth doing if you've got existing credit card debt, because this card also offers 0% on balance transfers for 12 month. So you can transfer your existing debt onto this card and you won't have to pay a penny in interest.

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Meanwhile, the Tesco Bank Clubcard Credit Card MasterCard is worth an extra look if you regularly shop at - you've guessed it - Tesco! This is because if you use this card to pay for stuff at Tesco, you'll get five clubard points for every £4 you spend in store, instead of four. You'll also get 1 clubcard point for every £4 you spend elsewhere using the card.

The Virgin Money Mastercard is operated by MBNA, and MBNA doesn't allow transfers from other MBNA cards, so if you don't think you can pay off your debt in a year, avoid the Virgin card. This is especially worth noting because the APR jumps up to a very uncompetitive 18.9% after a year.

Ensure you apply for a credit record check before you try to get any of these cards, to ensure any mistakes on your file are corrected before you apply. Here at lovemoney.com, we've secured a deal with CreditExpert where our readers can get access to their credit report for 30 days, for free. Just remember to cancel the policy once the 30-day trial is up if you don't want to get charged.

The top three cashback cards

You must pay off your card balance in full each month, or the interest you’ll be charged will far, far outstrip the cashback you earn. You must also use the card for purchases only - not for cash withdrawals or balance transfers, for example. Plus, it won’t be worth it if you buy the over-priced insurance they offer you.

Each card contains its own unique booby traps and otherwise require extra explanation for you to benefit, so here goes:

Amex Platinum Cashback Card

This card is not as widely accepted as VISA or Mastercard.

You won’t get any cashback in a year if you spend less than £3,000.

You’ll pay a £20 dormancy fee for every 12 months you don’t use the card.

On the plus side, in your first year, this card can be especially good. In my ‘Best for…’ column in the above table, I haven’t taken into account the massive three-month introductory deal of 5% on all spending up to a maximum of £500 of spend (£100 cashback).

Capital One World Card

£18 annual charge paid up front for each year ‘or part of year’, meaning you‘ll have to pay the whole fee now for 2010 despite several months having passed.

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The annual fee is subject to change. Capital One could, theoretically, increase the annual fee just before you’re due to collect the £10 bonus reward (which is credited to you in January of each year).

You have to spend at least £800 per year to make this card better than a bog-standard 0.25% cashback card. (If you exclude the £10 bonus then you need to spend at least £1,800.)

Egg Money World Card

You won’t get any cashback in a year if you earn less than £5 cashback (spend less than £500).

You need to spend at least £1,200 per year to make this card better than a bog-standard 0.25% cashback card.

Frequent travellers in London should also consider Barclaycard’s OnePulse Credit Card, which will pay you cashback of 5% on Transport for London spend (including the congestion charge) up to £300 of spend per month. This is likely to beat the Egg and Capital One cards if your total TfL spend is more than 20% of your overall annual card bill.

Finally, for really low spenders, or for simplicity, you can get 0.25% cashback with the Smile Card. There are currently no other cashback credit cards available to all UK residents, but Northern Ireland residents should check out the Bank of Ireland MoneyBack Credit Card before the Smile one.

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