Credit Cards

These are cards without any bells and whistles. You usually enjoy an interest free period on purchases until your next 'payment due' date, at which point you'll have to repay a 'minimum amount' at the very least. Interest will then be charged on any remaining balance.

These cards offer a low interest rate, sometimes zero, for an introductory period (usually up to 12 months). Transferring any outstanding balance on your existing card(s) to one of these offers could save you a lot of interest. However, once the offer period ends a far less attractive rate of interest will probably kick in, so be prepared to either pay off your balance or transfer to yet another introductory deal.

Mrs Canny transfers her £4,250 balance from credit card A, which charges 18.9% APR, to credit card B which has a six month 0% interest on balance transfers offer. Assuming she makes just the minimum monthly payment of 3% of the balance (min £5), then over the next six months she'll save over £350 of interest!

If you pay off your balance each month these are arguably the most attractive credit cards on the market. Every time you spend on the card you receive a small rebate (typically around 0.5% - 1.5%) on your account. A monthly spend of £1,000 with 0.5% cashback is worth £60 a year, not a fortune but well worth having provided there's no fee to own the card.

Similar to cashback cards but you receive the rebate in other ways, such as airmiles or credits to spend at certain retailers. Comparing like for like these deals are generally less attractive than cashback cards, but still better than a standard credit card provided you pay off your balance in full each month.

Charity cards are basically cashback cards where the cash goes to a particular charity. Sadly the donations tend to be less than you could earn on a cashback card and the interest rates uncompetitive. If you want to give to charity then far better to use a good cashback card and donate those rebates to your favourite charity.

Best summed up in one word - AVOID! Most stores are only too keen to offer you a credit card for use in their store...for good reason...the interest rates are usually sky high. Rates over one and a half times higher than those found on normal credit cards are not uncommon.

Mr Naive has a store card with CrooksRUS charging an APR of 40%. He spends £1,500 and subsequently makes the minimum monthly payment of 3% of the balance with a £5 minimum. After 12 months he'll have suffered a whopping £505 of interest and the balance will have only fallen to £1,457. If he repays only the monthly minimum it would take him over 84 years to clear the debt!

This is simply a limit on how much you can borrow. While a high limit might seem attractive, it means you'll be stung with loads of interest if you spend lots and can't afford to pay off your balance.

Provided you pay off your balance in full each month, you don't normally incur any interest on purchases until your next monthly statement. This means you could get up to 31 days free credit. However, many credit card companies add an extra 'grace' period of up to 25 days to this, potentially giving you up to 56 interest free days from the date of purchase until you have to pay.

Thanks to section 75 of the 1974 Consumer Credit Act, if you buy something between £100 - £30,000 with your credit card and something goes wrong (including overseas purchases), the credit card company is equally liable with the retailer (even if only part of the purchase price was made on your card).

This means you're protected, if, for example:

• You order an item and it never arrives.
• You buy an airline ticket and the airline goes bust.
• You buy an item that's faulty and the seller won't help.

The £100 limit applies to single items and you won't be covered if you pay via a third party (such as PayPal World Pay or an agent), although they may have their own schemes in place.

In the first instance you should try to rectify the situation with the seller, assuming they're not bankrupt, but if you have no joy then contact your card provider requesting a claim form.

You can usually withdraw money from a cash machine using your credit card, but at a cost. You'll normally be charged interest straight away and don't be surprised if it's half as much again as the rate you're charged on purchases. Much better to use a debit card if you have sufficient cash in your bank account.

The soaring popularity of credit cards has led to soaring credit card fraud, especially with the booming use of credit cards over the Internet. Thankfully, it's unlikely you'll lose out financially by much, if anything, if you do suffer from fraud.

If you lose your card, or it's stolen, then you could be liable for the first £50 of any fraudulent expenditure, although some credit card providers waive this.

If you suffer from fraudulent spending while the card is still in your possession then the card provider should be fully liable, not you.

Once an ultimate status symbol (for those into that sort of thing), the gold/platinum credit card is now more common than reality TV shows. While their status may have dwindled, they're heavily marketed by many providers with the lure of added 'benefits' such as discounts at certain retailers, travel services (just another way for them make money out of you) and higher credit limits (ditto).

If you find a good deal and the card happens to be gold, platinum, or some other prestigious colour, then fine, but don't assume that a card's merits are determined by its colour.

Interest is your worst enemy if you don't pay off your bill in full each month. It'll be charged on the balance thereafter and, on many cards, immediately on purchases too.

Rates vary widely, from 0% on some introductory deals to over 40% APR on the worst store cards.

Use your card to pay for things abroad and your card provider will likely charge you a 'load' of around 2.75%, i.e. £2.75 on every £100 you spend. Worse still, take out money from a cash machine any you'll likely pay an extra 2% with a minimum charge of around £2.50.

Some cards have annual fees, typically ranging from £20 to over £100. Unless you receive benefits that are worth more to you than the fee, avoid.

If you don't pay your minimum monthly payment (at the very least) on time, expect your credit card provider to slap you with a charge of around £10 - £25.

Low or zero interest balance transfer deals can be great, but watch out for an initial transfer fee of up to 3%, as charged by many cards.

Find out whether transferring your balance to a new card might leave you better or worse off, after any initial fees, using the Candid Balance Transfer Calculator.

When you make a credit card purchase the seller usually has to pay around 3% of the purchase price to the credit card company. Most retailers reluctantly absorb this themselves, so customers never notice. However, some businesses (especially online) are starting to levy a 'surcharge' on customers who choose to pay by credit card, aiming to cover their extra costs or even make a profit.

Most cards charge an application fee of around £10, basically an upfront charge. When applying it's worth checking whether the provider offers cashback via websites such as Quidco and Topcashback so you can claw back some of this fee.

Note, you might also be charged a similar amount if you wish to cancel the card in future.

These fees apply when you add a cash balance to your card and will be either a percentage of the amount loaded up or a fixed fee, usually up to 3% or £2. The method you use to top up can also affect charges, for example topping up via debit card or a post office is often cheaper than using a 'paypoint' (found in newsagents, garages, convenience stores and supermarkets).

Some cards charge you every time you make a purchase, either as a percentage of the amount spent or a fixed fee, usually up to 2.5% or £1.50. Fixed charges are best avoided unless you'll only be making a few large purchases.

A few cards charge a monthly fee, ranging from £1 to over £10 or annual renewal fee of around £10. Provided top up and transaction charges are either very low or zero then a small monthly or renewal fee can be worthwhile, otherwise these cards are best avoided as they can prove very expensive.

Some cards charge an inactivity fee of around £2 per month if you haven't used the card for certain number of months. You can avoid this by making a small purchase with the card if you're in danger of breaching the inactivity threshold.

Use a prepaid card to withdraw some of your cash from a hole in the wall and you'll probably be slapped with a charge of up to £1.50. If you're likely to use this facility then look for a card that offer free withdrawals.

If you use a prepaid card abroad then you'll probably be charged around 3% per transaction and 2.5% to withdraw money from a cash point machine. You should also check the exchange rate that they'll use.