Credit cards aren’t just about spending. They are also powerful tools that, when used wisely, can help you save money, manage debt and even earn rewards.
Whether you’re looking to cut down on interest payments, earn cashback on everyday purchases, rack up air miles for your next holiday, or avoid fees while traveling abroad, there’s a credit card tailored to your needs. In this guide, we’ll break down the best options on the market for balance transfers, purchases, cashback, air miles and travel spending. We’ll show you how to use these cards to your advantage, ensuring you get the most value while avoiding common mistakes.
A cashback credit card rewards you with a percentage of your spending, effectively giving you back some of what you spend. For example, if your card offers 1% cashback and you spend £100 on groceries, you’ll earn £1 back. This cashback is typically credited to your account or added to your statement.
Things to watch out for:
1. Limits: Some cards cap the total cashback you can earn.
2. Introductory offers: Cashback rates might only apply for the first few months.
3. Restrictions: Some cashback offers are limited to specific purchases or retailers.
4. Minimum spend: Some cards require you to spend a certain amount to qualify for cashback.
Kate Steere, a credit card expert at personal finance comparison site finder.com, said: ““Amex (AXP) currently offers the highest introductory cashback rate: 5% (up to £125), but it’s just for the first five months. That’s with the ‘Everyday’ Amex, and after the five months you’ll earn 0.5% ongoing cashback (1% on annual spend over £10,000), or you can upgrade to the Amex Cashback Credit Card (£25/year) for a slightly higher ongoing earn-rate.
“The Lloyds (LLOY.L) Ultra Credit Card is a good option if you’re looking for a decent initial cashback rate and no monthly fee. It offers 1% cashback for the first 12 months, dropping to 0.25% thereafter.”
A 0% purchase card allows you to make new purchases without paying interest for a set number of months. This can save you thousands compared with using a standard credit card, assuming you pay off the balance during the interest-free period.
These cards are perfect for planned, necessary purchases. Think of them as a tool for managing big buys such as a new TV or essential home improvements.
Let’s say you take out a 0% purchase card with a 10-month interest-free period and spend £2,000 on new appliances. If you repay £200 each month, you’ll clear the debt before the interest kicks in. However, if you still have a balance after the 10-month period, you’ll start accruing interest at the standard rate, which can be as high as 27% annually.
Key points:
1. Make sure to pay at least the minimum each month to keep the 0% deal.
2. Borrow only what you can comfortably repay within the 0% period.
Steere said: “While the 0% periods here aren’t as long as in the balance transfer space, the top deals from M&S (MKS.L) and TSB are both offering over two years interest-free.
“However, these cards all revert to very standard (read “punishing”) rates after the 0% period ends, so make sure to note when that is, and either clear your balance before then or look at balance transfer deals at that point.”
If you’re struggling to keep up with credit card payments, a balance transfer credit card can be a lifesaver. These cards allow you to transfer existing credit card debt onto a new card with a 0% interest rate for a set period, potentially saving you hundreds of pounds in interest.
However, there are some crucial rules to follow to make the most of these deals:
Always pay the minimum monthly repayment. Missing a payment could result in losing your 0% interest deal, incurring fines, and damaging your credit score.
Clear the debt within the interest-free period. To avoid paying interest after the promotional period ends, make sure you can pay off the entire balance within the 0% timeframe.
Don’t use the card for new purchases. The 0% deal usually applies only to transferred balances, and using the card for new spending could result in hefty interest charges.
Check your credit score. The best deals are often reserved for those with a strong credit rating, so it’s worth checking your score before applying.
Steere said: “There’s healthy competition in the balance transfer market at the moment, with five top providers offering almost three years at 0% … provided you’re willing to pay a transfer fee.
“Unfortunately, there’s little available in the middle ground. Either you’re looking at a term of nearly three years with a fee, or 14 months with no fee. However, if you think 14 months would give you long enough to get debt-free, then consider Barclaycard’s fee-free deal first.”
Some credit cards offer travel perks like flight upgrades and hotel stays ·mariaphoto3 via Getty Images
If you travel frequently, a credit card for air miles can help reduce the cost of flights and even unlock perks like flight upgrades and hotel stays. By using these cards for everyday purchases, you can earn points that can be redeemed for flights with your favourite airline’s loyalty programme.
1. Earn miles: Points are usually earned based on the amount you spend and the class of your ticket — premium tickets often earn more points.
2. Redeem points: You can use points to cover the cost of flights or upgrades, though taxes and fees may still apply.
Steere said: “Frequent flier credit cards typically come in pairs: the free option and the option with an annual fee. The Barclaycard Avios is the strongest fee-free option, with 5,000 Avios up for grabs if you spend £1,000 in the first three months, and 7,000 more if you spend £20,000 in the first year.
“But if you think it’s worth paying a fee to get a better points earn rate, the Virgin Money Atlantic Reward Plus card could earn you an extra 19,500 points in year one (and 4,500 extra points each subsequent year) but has a £160 annual fee.”
Planning a trip abroad? A specialist travel credit card can save you a bundle by offering near-perfect exchange rates without the usual foreign transaction fees.
Most credit and debit cards charge around 3% on foreign transactions, meaning a £100 purchase abroad could cost you £103. On top of that, some cards add a flat fee for every overseas transaction.
Specialist travel cards waive those fees, letting you spend abroad at the same rates your bank gets.
Key points:
1. Avoid cash withdrawals, as they often come with fees and interest.
2. Use the card for spending abroad to enjoy near-perfect exchange rates.
Steere said: “If you’ve got itchy feet, there are great offers at the moment to help you avoid currency conversion fees overseas, and you can even earn cash back on your spending (at home or abroad).
“Lloyds offers 1% cashback on all spending for the first 12 months with its new Ultra card, while you can get 1% cashback on eligible travel spending with NatWest (NWG.L). Just be sure to pay your card off in full each month to avoid paying interest (which would soon outweigh any cashback).”
Disclaimer: The opinions expressed are the author’s alone (unless stated otherwise) and have not been provided, approved, or otherwise endorsed by the providers listed. Yahoo does not earn any commissions from the lenders, or any other third party from the content in this series.
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