What's the best credit card for me?

In the run up to Christmas most of us could do with extra money and if used wisely, a credit card can be handy for short-term borrowing.

More than a third of us will pay for Christmas using our credit card, with 35 per cent using it for presents and five percent for the turkey, says uSwitch.com. However, just over a third of shoppers will use a high-interest rate card missing out on cheaper borrowing and incentives.

There are hundreds of credit cards to choose from, from those that give you the lowest interest rate for purchases, those that give you the most time to pay off debts, to those that reward your spending.

Reward credit cards

If you clear your credit card balance every month, you won’t be charged interest on the purchases you’ve made, so it makes sense to get something back on your shopping by paying with a cashback or reward credit card. Cashback cards typically pay you back 1-3 per cent of your spend as an annual bonus, while reward cards give anything from air miles to days out and supermarket loyalty points.

0% cards

If you’re looking to spread the cost of purchases, opt for an interest-free credit card. These offer new customers 0 per cent interest on purchases for as long as 30 months. Providing you repay the debt within the interest-free period, you won’t pay any interest charged by the card issuer. However, once the introductory period has ended, the issuer charges its standard interest rate and these can ramp up, so check terms carefully.

Balance transfer deals

If you’re struggling to repay debt now or after Christmas, a cheap balance-transfer credit card allows you to move existing debt over to a new card that charges either a very low interest rate, or gives you an interest-free period, sometimes over three years. You usually pay a fee to move your debt which is calculated as a percentage of the amount you're transferring and if you don’t clear the balance in full by the end of the 0 per cent period, you will be charged interest on the remainder of the balance.

Added protection

Using a credit card for your Christmas shopping also gives added protection for an item costing over £100. Your credit card provider is jointly responsible with the retailer for the services or goods you have paid for. So if the retailer goes bust, or you receive faulty goods, you may be able to ask for a refund. Where this protection may not apply, is if an an additional cardholder makes a purchase, or spending via group-buying sites such as Amazon Marketplace or Groupon.

What to watch out for

One of the biggest hidden costs with credit cards is the charge for cash withdrawals, so avoid using it this way. Don’t exceed your credit limit; ask your card company to reduce it if it’s too high as it impacts on other borrowing. Finally, make sure you can afford the repayments when the bill hits the doormat in January.

5 of the best credit card deals

For cashback

1. American Express Platinum Cashback Everyday Card offers introductory 5% for 3 months on spending between £1,000-£2,000 and 0.5% up to £5,000 thereafter.

2. Asda Money Cashback Plus Mastercard offers 2% on all Asda spending and 1% on transactions elsewhere

For rewards

3. Barclaycard Freedom Rewards Visa collect 2 points per £1 in supermarkets and petrol stations, and 1 point elsewhere and earn vouchers to spend at retailers including M&S, Wyevale Garden Centres and Starbucks

4. 0% introductory rate cards Virgin Money offers 30 months' interest free, Tesco Bank and Sainsbury’s offer 0% for 28 months and the Post Office 27 months

For balance transfers

5. 0% balance-transfer cards both Halifax and MBNA offer 0% for 41 months