Look before you leap - into signing up

Does the rate advertised apply to new purchases, or to transfers of debt from other cards, or both?

Many credit-card companies offer an eye-catching rate for debt transferred from another card, but a much higher one on new debt added to the card. Confusingly the rates may be advertised as annual percentage rates (APRs) even though they apply only for a few months.

Halifax is offering 3.9 per cent for debt transfers only, which expires after five months. New borrowing will be charged at 17.9 per cent (APR). The interest-free deals from Egg and Capital One, however, offer the free rate on purchases only, while debt transfers will be charged at 2.5 per cent (APR) and 7.9 per cent respectively. At the end of the introductory periods, Egg will charge 11.9 per cent and Capital One 12.9 per cent.

If purchases are not repaid at the end of the six months, interest will start to be ap-plied from the beginning of the seventh month. While Egg's debt transfer rate is competitive, there are cheaper rates than Capital One's 7.9 per cent.

Nationwide and RBS Ad-vanta have tended to specialise in low rates, but not necessarily the lowest, on both debt transfers and new purchases. RBS has an introductory rate of 2.9 per cent on transfers and purchases until next June, while Nationwide charges 3.5 per cent for six months.

How long does the rate last and what will I pay after that?

Low rates are designed to lure borrowers who, the card operators hope, will forget that rates jump later. The alternative, at the end of a low-rate introductory period, is to switch, or surf, to another card. It may pay to have one card to repay accumulated debt and a second, perhaps an interest-free one, for purchases.

Is it a good idea to pay by direct debit?

If you pay just the minimum required by the lender each month, this will normally be just 3 per cent of your balance. This is not enough to make inroads on substantial borrowing.

What's a monthly fee?

Abbey National's internet bank cahoot is experimenting with a system that offers the option to pay a set monthly amount, or fee, rather than interest. This card also gears rates to customers' credit scores - they average 8 per cent APR - so is one of the more complicated in the market. The monthly fee option works out cheaper, it says, for people who do not pay down their debts. If you started the year with a £3,000 debt and kept it constant at this level throughout the year, you would pay a monthly fee of £16 a month, or £192 for the year, £48 less you would pay in interest. But if you decide to pay off the debt in 12 months, interest charges would be £132.

Tim Sawyer, cahoot marketing director, says: 'If you think "I will always stay in debt", this is the cheapest way to do it. But we allow people to repay the debt at any time.'

Does the card have an interest-free period?

With one or two exceptions, credit cards will cost you nothing if you pay in full each month. Unless an annual fee is charged, and depending on how the card's charging system works, it will usually charge nothing if the bill is paid within 56 days of the purchase, the date it hits the account or the statement date.

The length of interest-free grace depends on when you make your purchase during the billing cycle. Some cards have shorter interest-free periods; Alliance & Leicester has a card with a 46-day period, as do cahoot, the Co-operative Bank, Direct Line, Northern Rock and Smile, while Egg and Woolwich have 45-day grace periods. Short interest-free periods also mean you will normally have only 15 days from the date of the statement to pay your bill. If you miss the payment, you might face penalty charges and interest backdated to when the transaction reached the account.

If there is no interest-free period, you will pay interest from the date any new transaction reaches your account. Among those offering cards like this are A&L, Bank of Scotland, First Trust Bank, the Co-op Bank and Halifax. Rates tend to be lower than on conventional deals because the cards are designed for habitual borrowers (see Have I Got the Right Card?)

What are the charges if I miss a payment or exceed my credit limit?

Penalty charges are a feature of many cards with the lowest headline rates of interest. Late payment penalties, or spending beyond your credit limit may cost as much as £20.

Is there any point in having a store card?

Many retailers offer attractive discounts for buying with in-house cards. But do pay off your card each month to avoid punitive interest.

What about gold and platinum cards?

Rates aren't necessarily lower; in fact standard rates are generally higher than on ordinary cards but you will normally get a generous credit limit and some bells and whistles such as accident insurance.

In credit, in control

Louise Bromley, 26, recently bought her first
home, a flat in a 500-year-old building in Rochester,
Kent. The move has put pressure on her finances and
she has been using credit cards to help her equip her
new home. But Louise feels she is in control.

She has taken out a zero per cent card with internet
bank Egg, which will finance new purchases over the
next few months and hopes to cut interest bills on
existing debt by taking advantage of the 2.5 per cent
rate for debt transfers. She has debt of around ?4,000
in total, but has worked out a plan which she hopes
will clear her debt by early next summer.

Louise explains: 'What I will try to do is set a core
amount to repay, say ?400 or ?500 a month, and try to
get it paid off by May or June next year. Things I would
usually put on a credit card, like holidays, I will pay off
immediately.'

All her new purchases will be interest-free. Egg will
charge 11.9 per cent after Louise has had her card for
six months and she hopes that it will maintain a
competitive long term rates. 'No one wants to be
switching all the time,' she says.