Top credit cards for spending!

If you're planning to spend on your credit card, make sure you use one of these top cards...

In an ideal world, we would all pay off our credit card balance in full each month – and that way, we’d completely avoid paying interest.

However, for many of us, that’s just not possible.

And unfortunately, according to research from Sainsbury’s Finance, the average interest rate on credit card purchases is currently 18.2%, compared to 16.3% two years ago. That means, if you’re planning to spend on a credit card, you need to be careful.

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My next holiday, for example, is going to be my honeymoon in July – and personally, I can’t wait.

But unfortunately, I can’t afford to pay for it one go.

So I decided it was time I took the next best course of action and apply for a 0% new purchases credit card. This way, I would be able to spend on the card, without worrying about paying interest for up to a year.

The top cards for spending

The chart below highlights six of the best 0% purchases credit cards on the market.

The Sainsbury’s Finance Nectarcard Credit Card MasterCard is the joint market-leader with the Tesco Bank Clubcard MasterCard because they both offer 12 months interest-free on all new purchases. So you won’t have to pay a penny of interest on that debt for the first year.

The Sainsbury’s credit card also offers 12 months interest-free on balance transfers. Normally, we wouldn’t recommend that you transfer a balance onto a credit card you’re planning to spend on due to a nasty trick called negative order of payment.

• Watch our video: Don’t get caught out by negative order of payment

However, because the interest-free period on the Sainsbury’s Finance Nectarcard Credit Card MasterCard is exactly the same for both balance transfers and purchases, your debts will be treated exactly the same – and you will therefore neatly side-step negative order of payment.

The downside to this card, however, is that you will need a Nectar card to apply. Although this is easy to apply for, if you don’t regularly shop in Sainsbury’s, you might prefer the Tesco Bank Clubcard MasterCard instead. As well as an interest-free period of 12 months on all purchases, with this card you’ll earn Clubcard points for spending.

However, make sure you don’t transfer a balance onto the Tesco card as it only offers six months interest-free on balance transfers. So if you do this, you’ll get stung by negative order of payment.

In for the long-term

The only problem with 0% purchases credit cards is that the interest-free period does of course, expire. And if you haven’t managed to pay off your balance in full by the time that interest-free period comes to an end, you’re going to get hit by a hefty interest rate.

If you know you’re going to struggle to pay off your bill in full by that point, you have two options. Number one, you could transfer your debt onto a 0% balance transfer credit card. The Barclaycard Platinum with BT Visa, for example, offers an interest-free period on all balance transfers until June 2011. However, you will need to pay a 2.9% transfer fee.

The second option is to apply for a credit card with a long-term deal. Take the Halifax Easy Rate MasterCard, for example, which offers an interest rate of 6.9% on all purchases. This has no promotional period, so this deal won’t come to an end. That said, this rate is variable, so it could change.

This low rate also applies to all balance transfers. Just be aware, you’re likely to need a good credit history to qualify for the rate of 6.9%. You don't need to pay a transfer fee with this card, so it may actually work out cheaper for you than some 0% balance transfer cards - read This credit card beats the longest 0% cards to find out more.

Get cashback and rewards

Finally, if you're one of the lucky ones who knows you WILL be able to afford to pay off your credit card bill in full each month, it’s a good idea to apply for a cashback credit card. That’s because you’ll earn money back every time you spend – so you may as well be rewarded for your spending!

The American Express Platinum Cashback Card, for example, offers 5% cashback for the first three months, up to £100. Thereafter, you'll get 0.5% cashback on the first £3,500 of spend, 1% from £3,501 to £7,500, and 1.25% from £7,501 upwards.

Just bear in mind that American Express isn’t accepted everywhere, and of course the top cashback deal of 5% will expire after three months.

Alternatively, the Egg Money Mastercard offers 1% cashback. You’ll also get purchase protection with this card. On the downside, you will need to pay a monthly fee of £1. You can find out more in Top reward and cashback cards.

Finally, if you prefer rewards, rather than cashback, then take a look at the American Express Rewards Credit Card. You can earn up to 3 points per £1 you spend, and once you reach 5,000 points, you can exchange them for a £25 gift voucher from a range of shops, including M&S, HMV and Amazon.

And if you're into collecting Air Miles, the Lloyds TSB Airmiles Duo card is one of the best you can get, because you can redeem your points against the full cost of the flight - including taxes. Unusually, you get two cards with this deal: a Mastercard and American Express. So you can always earn points, even if the retailer doesn't accept American Express.

Whichever card you choose, as long as you make sure you’re using the right credit card for your purchases, you should save yourself a pretty penny.

More: Don’t use your credit card to do this | This credit card beats the longest 0% cards