Credit Cards: a quick guide

• 7 reasons why you should have a credit card

  • Cheap borrowing

    For borrowing up to £5000, the right credit card can be the cheapest option. With the longest ever interest-free deals on balance transfers and purchases you can clear existing debt or plan for a one-off expense.

  • Make money

    Cashback and rewards credit cards pay you to spend and you could earn an average of £1 cashback for every £100 you spend. So, ditch the debit card and pay with your credit card, but make sure you pay off the balance every month or those gains will soon be wiped out.

  • Build better credit

    A good credit rating can help you unlock the lowest interest rates on a mortgage or loan. A bad one could freeze you out of the cheap borrowing market and make it hard to find credit. Using credit cards responsibly is a good way to strengthen or repair your credit record.

  • Cheap overseas spending

    Spend on the right credit card abroad and you'll avoid commission as well as getting the best possible exchange rate. But avoid cash withdrawals from overseas ATMs as these can still carry hefty fees.

  • Purchase protection

    Credit card purchases over £100 are covered by Section 75 consumer protection. So, if a purchase breaks, isn’t as described or doesn’t turn up you can seek financial compensation from your credit card provider as well as the retailer.

  • Protect your money

    Lose a wallet full of cash and you'll probably never see that money again. But mislay your credit card and you shouldn't be liable for money spent on it after you lost it. Report the loss immediately and take care never to reveal your PIN - if your credit card company can prove your were negligent they won’t pay up.

  • The only payment option

    Hotel bookings and car rentals often require payment on a credit card. This is because it gives the company the assurance that they can recoup any additional costs you run up.

• 3 tips for making the most of your plastic

  • Stop using your debit card Credit cards offer better benefits, can earn you money and protect your purchases.

  • Switch existing debt to a 0% balance transfer card If you’re paying interest on an existing credit card balance, switch to a 0% deal. The average saving is more than £750 (based on the average balance transfer value of £2,222 (source: BBA correct as of April 2014), the average credit card interest rate of 17.36% (source: Bank of England, correct as of May 2014) and the longest available balance transfer deal (Barclaycard, 33 months)).

  • Start earning rewards On average you’ll make over £300 a year.

• Card finder: your quick start guide

  The right card for you will depend on how you intend to use it. This quick guide will help you narrow your choice. Once you know the kind of card you need, use our comparison tables to find the one that is likely to save or make you the most money and to check your eligibility.

  • Do you have existing credit card debt?

    • YES: Go to question 2
    • NO: Skip to question 3

  • Do you want to spend and save interest on outstanding debt?

    • YES: Get a balance transfer and purchase card
    • NO: A balance transfer card best suits your needs

  • Are you looking to spread the cost of a planned purchase?

    • YES: A 0% purchase card will let you spread the cost for free
    • NO: Go to question 4

  • Do you clear your balance in full every month?

    • YES: A cashback card or rewards card will be ideal for you
    • NO: A 0% purchase card will save you paying interest on balances

  • Do you travel abroad regularly?

    • YES: An overseas spending card will cut your costs
    • NO: Return to Question 4

• Choose the right credit card: a quick start

  Balance transfer credit cards

  If you're paying interest on an existing credit card balance, you could move it to a balance transfer card and take advantage of the 0% interest offer period to tackle your debts. There will be a 2–3% fee to pay when you initially move the money. Some of the longer deals have higher fees, so you might be able to save more by going for a shorter 0% period with a lower transfer fee. Our balance transfer calculator will help you find the card that will save you the most money and show you your likelihood of being accepted. Avoid spending on a balance transfer card as you will pay interest on the spending on purchases.

  Learn how to save money with a balance transfer card

  Purchase credit cards

  This card allows you to spread the cost of a large, planned purchase over several months – you pay no interest on your spending during the introductory period so long as you make the minimum repayment each month. But make sure the balance is paid off, or moved to a balance transfer card, before the 0% period runs out, or you'll end up paying a high standard rate of interest that will quickly wipe out the initial benefit.

  Spread your costs without paying interest with a 0% purchase card

  Balance transfer and purchase credit cards

  If you're carrying debt on a credit card and want to spread the cost of a large one-off purchase then this could be an option. However, the rates on offer tend not to be as good as those you could get from having separate balance transfer and purchase cards.

  Find out how to make the most of a combined credit card

  Cashback credit cards

  If you always clear your balance each month, a cashback credit card rewards you by giving you 1%-5% of your spending back. Don't build up debt on this card as high interest rates will rapidly wipe out any earnings.

  Earn when you spend with a cashback card

  Rewards credit cards

  An alternative option for people who pay off their balance in full each month,these credit cards allow you to earn points that you can use to buy flight tickets with.

  Getting the most from your rewards credit card

  Store cards

  These credit cards, offered at the till in various stores with introductory offers such as 10% off your shop that day, usually come with an extortionate rate of interest, so it's best to say no.

  Charity credit cards

  Although spending money on a credit card that earns a percentage for your favourite cause seems like a great idea, the amount the charity receives is typically only 25p for every £100 you spend — that’s a pitiful cashback rate of 0.25%. Better to donate all the money you earn from using a standard cashback credit card to charity and give about £1 of every £100 you spend.

  Why you should dump your charity credit card

  Overseas spending

  If you use a standard credit card abroad you will pay an additional fee, typically about 3%, on every transaction. But with overseas spending credit cards these fees are much lower, or waived entirely, and that means cheaper holiday spending for you.

  Find the best card for overseas spending

• The five fundamentals of building good credit

  Follow these five rules to get the most from your credit card and build a first-class credit rating.

  • Set up a direct debit to avoid missed payments

    The number one rule of good credit is never to miss a payment. So, set up a direct debit for at least the minimum payment to ensure you always pay on time. This way you avoid penalties, additional interest charges and the possibility of losing any 0% deals.

     How to avoid the minimum repayments trap

  • Limit your credit applications

    Every time you apply for a credit card a credit check is run and recorded on your credit file. Too many checks in too short a time is a red flag for lenders as they can see you as desperate for money. Our eligibility check will tell you which credit cards are most likely to accept your application without leaving a footprint on your credit record.

     Learn more about your credit score

  • Use your credit card

    Using your card and paying off the balance responsibly will help build a stronger credit record, and give you to access better deals and interest rates in the future.

     Make the most of your credit card

  • Cancel unused credit cards

    Lenders base their decision in part on the total available credit that you have access to, and that will include credit limits on unused cards. So eliminate any excess by contacting the providers to cancel the cards - don't just cut them up, that won't help your credit file.

  • Understand your deal

    Get to know your credit card intimately — understand the interest rates and fees that apply, and set a reminder in your diary for at least six weeks before any 0% deal is due to end. This will help you avoid any penalties.

• About our comparison service

  We believe technology can drive a fairer credit market and better outcomes for consumers. By using pre-screening and other technologies we offer accurate, impartial comparison tools and credit products.

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  Unlike all other comparison sites, we’re completely focused on credit comparison. It’s all we do and because it’s all we do, we do it better.

  100% free

  It costs you nothing to compare credit. There are no hidden charges.

  Unbiased

  Our comparison tools rank products based solely on what represents the best value for you. We guarantee that no company can ever pay to appear higher in our results.

  Comprehensive

  We compare every major credit card in the UK, hundreds of loans and more than 5,000 mortgages. No one compares more.

  Simple

  We’ve made it intuitive to compare credit cards by showing the true value of each product to you. You can compare the whole market in seconds and our calculators make it easy to see how much you could save or earn.

• How to protect your credit rating

  Seven million consumers are declined for credit every year, which has a negative effect on their credit rating. Comparing credit cards with TotallyMoney.com can protect you from this.

  Our eligibility check shows you the cards you’re most likely to be accepted for BEFORE you apply. We’ll never compromise your credit record or leave a mark on it that lenders can see.

  Double your chances of acceptance

  In Jan-Jul 2014, customers who used our eligibility check service to run a full credit card comparison saw a 114% higher acceptance rate.