Credit Cards as a Tool for Savings and Financial Management

Credit cards are often viewed solely as tools for spending, but they can also be powerful financial management instruments when used wisely. In addition to enabling you to earn rewards and manage debt, credit cards can help you save money on interest payments, avoid fees while traveling abroad, and even rack up air miles for your next holiday.

Best 0% Balance Transfer Credit Cards

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.

When it comes to making the most of these deals, there are some crucial rules to follow. Firstly, always pay the minimum monthly repayment to keep the 0% deal intact and avoid losing your interest-free period. Secondly, clear the debt within the interest-free period to avoid paying interest after the promotional period ends. It's also essential not to use the card for new purchases, as this could lead to hefty interest charges.

According to Emily Herring, a credit card expert at personal finance comparison site finder.com, "You could save money by transferring a high-interest credit card balance to a 0% interest card, allowing you to pay off the balance interest-free within a set timeframe."

Currently, the longest interest-free balance transfer period available is 30 months, offered by Barclaycard and HSBC. These cards charge a one-time balance transfer fee but have no annual fees. Alternatively, if you prefer a no-fee option, Barclaycard offers a 0% interest period of 14 months, while Tesco Bank offers 18 months with a low transfer fee – though these periods are shorter than the maximum available.

Best 0% Purchase Credit Cards

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 such as big buys like 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. According to Herring, "Barclaycard is leading the way with its 22-month 0% introductory period for purchases (19 months for balance transfers), making it a great option for spreading the cost of a large upcoming expenditure."

There's no annual fee, but a 24.9% interest rate applies after the 0% period ends. MBNA also offers up to 21 months interest-free on purchases, though this only applies to spending within the first 60 days.

Best Cashback Credit Cards

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.

When choosing a cashback credit card, there are several things to watch out for. Firstly, limits may apply, capping the total cashback you can earn. Secondly, introductory offers might only apply for the first few months. Thirdly, restrictions may be in place, limiting cashback offers to specific purchases or retailers.

Lastly, some cards require a minimum spend to qualify for cashback. According to Herring, "Earning cashback on your everyday spending is a good way to make your money work a little bit harder for you." She recommends the American Express Cashback Everyday Credit Card, which currently offers the highest introductory cashback rate, earning you 5% cashback on purchases (up to £125) for the first five months.

After that, you can still earn 0.5% cashback on an ongoing basis, or 1% on annual spend of over £10,000. There's no annual fee with this particular Amex card either.

Best Credit Cards for Air Miles

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.

How it works is as follows: firstly, earn miles by making purchases on your credit card; secondly, redeem points to cover the cost of flights or upgrades – though taxes and fees may still apply. According to Herring, "For big rewards, the British Airways American Express Premium Plus Card offers 30,000 Avios when you spend £6,000 in three months, while the Barclaycard Avios Plus Card gives 25,000 Avios for spending £3,000 in the same period."

Virgin Atlantic fans can earn 18,000 points with the Virgin Money Virgin Atlantic Reward Plus Credit Card by making their first purchase within 90 days.

Best Credit Cards for Holidays and Travelling

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.

When choosing a specialist travel card, avoid cash withdrawals as they often come with fees and interest. Use the card for spending abroad to enjoy near-perfect exchange rates. According to Herring, "The Barclaycard Rewards Credit Card and Virgin Money Everyday Cashback Credit Card don't charge fees for making purchases overseas. Neither card has an annual fee and you could benefit from earning 0.25% cashback on your holiday spending too."

Conclusion

Whether you're looking to manage debt, earn rewards, or save on travel costs, choosing the right credit card can make a big difference to your finances. Be sure to compare offers and read the fine print to find the best card for your needs.