Money: `Surf' and save on the cards

If The festive season and January sales threaten to give you a hangover of unclearable credit-card debts, switching cards may ease some of the financial pain.

The credit-card market has never been more competitive and there is nothing to stop cardholders from switching debts they have run up from one card to another - indeed the companies actually encourage it.

RBS Advanta, a credit-card arm of Royal Bank of Scotland, has launched what it claims is the most competitive card offer yet for those who cannot stretch to clearing their monthly bill.

You will still clock up interest on balances you do not clear, but at a rate of just 7.9 per cent on both transferred debts and any further spending for the whole of 1998 - a significantly lower rate than the 20 per cent-plus charged by many traditional cards.

The special offer rate equates to interest of 0.64 per cent a month. From January 1999, RBS Advanta's standard annual apr rate - presently 17.9 per cent - would apply. However there is no "lock-in" to keep cardholders beyond this special-offer period, and the standard and gold cards available both carry no annual fee and interest-free periods of up to 56 days.

RBS Advanta's offer stands out for its combination of a low rate and few catches: it lasts a whole year; people who pay off their debts gradually while running up new bills will not find they are paying off cheap debt while being charged more on the new; and there is nothing to stop cardholders switching - "surfing" - to another cheap deal at the end of the special period.

Alliance & Leicester is also making a New Year pitch for card borrowers with its Diamond card, which charges a fixed 8.9 per cent on transferred balances for as long as they take to clear. However any new purchases are charged at 13.9 per cent.

In general, the RBS deal looks the better bet - assuming you are prepared to switch again at the end of the year. But your decision should depend on how you use the card.

For example, the Co-operative Bank also has a special introductory rate of 7.9 per cent on its Advantage card for both transferred debts and new spending. This rate only lasts until April, while beyond this the standard rate is 10.9 per cent. This makes it most suited to long-term credit- card borrowers who rarely pay off their bills in full. For those who sometimes or normally pay off their account in full, a card with an interest-free period might be better.

Barclaycard, by contrast, is running a superficially attractive offer to wipe off up to pounds 150 from transferred debts straight away, although to get the full pounds 150 you would need to transfer pounds 3,000 - the refund is 5 per cent of whatever you transfer. However, once you become a Barclaycard customer you are charged a pounds 10 annual fee and standard interest of more than 20 per cent on uncleared debts. In addition, in a bid to discourage credit-card surfing, the bank has put a get-out clause in its literature "reserving the right to require repayment" of whatever refund you get if it does not make the same amount back in fees and interest.

Around a half of all credit cardholders - about 10 million people - are estimated to pay interest on their cards and their balances are generally higher than average, so switching savings can be substantial. And even the other 10 million who pay off their bills in full each month can benefit from being selective in their choice of card.

Alliance & Leicester, which last year launched the only card in the UK to pay cash rebates on all spending, will this month send out cashback cheques totalling pounds 5m to its 250,000 Money Back card holders. A typical cheque might be for pounds 50, says A&L, although some people have notched up rebates of pounds 300 or more. In 1998 the level of cash rebate paid falls to 0.5 per cent on the first pounds 3,000 of spending and 1 per cent thereafter, although the bank is also arranging deals for "double money back" for purchases from selected companies.

Another card offering "something for nothing" to those who pay off their bill in full each month is the British Gas-backed Goldfish card, which offers spending-related rebates off "home essentials". It has just launched an option to cash in points for Marks & Spencer's vouchers. To get a pounds 10 voucher, cardholders will have to spend pounds 1,250 - a rebate level equating to 0.8 per cent of spending.

q RBS Advanta, 0800 077770; Co-operative Bank, 0800 109000; Alliance & Leicester, 0500 838383; Goldfish, 0345 609060.