Shop around for the best credit card deals

Leicester's shoppers are lagging behind when it comes to making savings on essential purchases, a new study reveals.

While bargain hunters in Birmingham are pocketing as much as £528 each per year by shopping around for the best deal on items such as groceries, insurance, clothing, mobile phone contracts and holidays, Leicester consumers are only saving around £240.

This not only puts the city below the national average of £346 per shopper but also at the bottom of a list of the country's major cities and towns ranked by how much consumers save a year.

The research, from Santander, reveals that one of the main reasons people don't save as much as they could is a lack of time to shop around, with 42 per cent saying they found it hard to keep up with the latest deals.

Women appeared to be the best bargain hunters, with 40 per cent saying they always find the best deal on groceries compared to 33 per cent of men, and the biggest savings on clothing, where it's 31 per cent compared to 22 per cent.

Keith Moor, director of brand and communications at Santander, said: "Our research has shown the flip side to the doom and gloom associated with a recession as many people are actually reaping some pretty significant financial benefits by shopping around for the best deal."

While many people looking to keep a tight control on their cash might avoid borrowing or spending on credit cards, financial experts at MoneySupermarket say it might be time to think again.

They say a card can be an essential financial tool that careful shoppers could use to their advantage, with 0 per cent interest offering the opportunity to spread the cost for free, cashback deals and added consumer protection on purchases.

They do warn shoppers to choose and their card wisely to avoid racking up debts, however, and have put together the following guide to using plastic carefully and to your advantage.

A valuable form of protection

One great advantage of paying for something on a credit card is the protection it affords you as a consumer. Say for example, you made a major purchase such as an expensive piece of furniture, a car, holiday or new computer.

Before you received the goods, the company went bust and you were hit with the awful realisation that you could have lost all your hard-earned cash. But had you bought the items on a credit card, this wouldn't be the case.

This is because you would be protected by section 75 of the Consumer Credit Act which states that you are entitled to a full refund for items priced between £100 and £30,000 if a company goes bust or the goods are lost, stolen or damaged.

And if your item cost between £30,000 and £60,260 the more recently-introduced Consumer Credit Directive will cover that slice of spend to the same effect.

The really good news is that even if you only paid the deposit on credit card, you can still get the full amount back in the case of any of the above eventualities.

Cards that let you spread the cost for free

A credit card can also help you purchase a big-ticket item that would otherwise be out of reach, or take months to save up for. But don't plump for one that will charge you monthly interest.

Instead shop around for a credit card deal offering 0 per cent for a number of months. This way you can spread the cost of your purchase and pay it back in monthly instalments, without it costing you a penny in interest.

For example, the Tesco Clubcard Credit Card offers 0 per cent on purchases for a generous 16 months. If you are a Tesco customer it's handy as it doubles up as a Clubcard giving you five points for every £4 on Tesco shopping and one point for every £4 spent elsewhere.

However, make sure you have paid off your balance at the end of the 0 per cent period otherwise the interest would start piling on at a representative APR of 16.9 per cent (variable).

Another option is the Halifax Online All In One which offers a slightly shorter 0 per cent period at 15 months.

Cards that will pay you back

Some credit cards even reward you for spending by offering perks such as cashback or rewards.

Santander's 123 credit card for example, pays 3 per cent cashback on fuel spend (up to a limit of £9 a month); 2 per cent cashback on department store spend and 1 per cent cashback on spend in supermarkets, all in exchange for a good credit score and a £24 annual fee.

However the fee puts the representative APR at a hefty 22.8 per cent (variable) so you'll need to pay off your balance off every month. Cashback on the card is also capped at £300 a month.

If you are a frequent traveller, you may prefer to opt for a card that will reward you accordingly. For example, with the British Airways American Express Premium Plus card, you will get 1.5 Avios (formerly airmiles) for virtually every £1 you spend and three Avios for virtually every £1 you spend direct with British Airways or BA Holidays.

However, once the hefty £150 annual fee has been factored in, the card comes with a whopping representative APR of 50.1 per cent (variable). So, again, if you think that this card is for you, make sure you can pay the balance off each month.

Cards that will accept existing debt

Another way credit cards can help you manage your money is by finding a card that you can transfer current credit card debt onto. This is particularly useful if the debt is amassing interest and getting you caught in an expensive trap which can then be hard to get out of.

A credit card with the most generous interest free period on balance transfers is the Barclaycard Platinum with extended balance transfer.

This gives you 22 months to pay off your balance with no interest, allowing you to plan ahead and organise your finances. The representative APR after this period stands at 17.9 per cent (variable) so you would either have to make sure you had paid off the debt by that point, or move it again on to a different balance transfer card.

You won't be able to transfer the debt onto a card from the same provider though.

Qualifying for the top credit card deals

While a number of these cards are attractive, it's important to realise that you will only be accepted for the best deal if you have a good credit score. If you have a poor credit history and then get rejected after applying, you will only further damage your score.

There are two ways you can find out which cards you are likely to be accepted for. Using MoneySupermarket's smartsearch tool will give you an idea of the types of cards you could go for, but won't leave footprint on your credit file which is good news for further applications.

Or you may wish to get in touch with credit reference agency, such as Experian or Expedia and order a copy of your credit file. You can either sign up for monthly access which will give you a detailed view - also for a monthly fee - or you could order a copy of for your statutory report for £2.

Please note: Any rates or deals mentioned in this article were available at the time of writing.