The cards are stacked in your favour

BARCLAYCARD has slashed its interest rates by a whole percentage point to 21.9 per cent. But despite the cut, it is still one of the most expensive credit cards on the market.

Other big banks are just as guilty. Lloyds charges 23.8 per cent on its Mastercard and Royal Bank of Scotland 23.2 per cent on its Visa card. Of the big four high-street banks, only Lloyds offers a card with an APR below 17 per cent and no annual fee.

Despite all this, 60 per cent of credit-card holders still have cards issued by high-street banks. But interest rates are already low and further cuts are likely. If you wouldn't put up with such a high interest rate on your mortgage, why accept it on your short-term borrowing?

There is no good reason to accept these expensive rates. Big US card issuers are mounting an attack on the UK with rates as low as 6.9 per cent. And there's no reason to put up with an annual fee, either. There are plenty of good deals with no fee.

It may be time to switch card, then, but in order to get the best possible deal you need to decide what sort of card user you are. If you are one of the 40 per cent of card holders who clear their balance in full each month, the interest rate isn't going to affect you, so you may as well choose a card on the basis of any perks it offers.

But be careful. To avoid paying any interest on your borrowing, you need a card with an interest-free period - usually between 46 and 59 days. Not all cards offer this period. The Lloyds Bank Personal Advance Mastercard, for example, charges interest from the date you charge something to your card, as do many other low-APR cards. So you still end up paying interest even when you clear your balance.

But as long as the card you choose has an interest-free period and you intend to clear the bill in full each month, you can take advantage of any extras.

There are now several cards with loyalty points schemes. For example, NatWest's Visa and Mastercard pay five Air Miles for each pounds 100 you spend. It sounds generous but you'd have to spend at least pounds 2,000 on the card before you recouped the pounds 12 annual fee - and you'd still have only 100 Air Miles.

Other schemes pay points that can be exchanged for discounts on a range of goods and services. Goldfish points, for example, can be exchanged for discounts on your gas bill.

If you are choosing a loyalty scheme, look for a card without an annual fee or your points could cost you more than you gain. Barclaycard pays 10 Profile points for each pounds 100 spent, but with a monetary value of 30p- 50p per 10 points, you'd have to spend around pounds 3,000 to recoup the pounds 10 annual fee.

The supermarkets have also launched cards with loyalty points. Sainsbury's Visa and Tesco's Visa now have 380,000 and 80,000 card holders respectively.

The American cards are more likely to suit people who use their cards purely for borrowing as they don't have annual fees and offer extremely low introductory rates. They tend not to offer any loyalty schemes or perks, although People's Bank cards come with pounds 100,000 of free travel accident insurance.

The introductory rates typically last from six to 12 months, after which time the rate returns to the issuer's standard variable rate - usually 17.9 per cent. A number of cards offer standard variable APRs lower than this. So if you really want to decimate the interest on your card spending, you could switch to a card with a low introductory rate, and once that period ends, switch to another card.

the top credit cards

APR Annual Interest-

fee free period

Cheapest (introductory rates)

People's Bank MC/Visa 6.90% Nil 56 days

0500 551055

Capital One Bank 6.90% Nil 54 days

MC/Visa 0800 9525252

Cheapest (non-introductory rates)

Capital One Premier Visa 12.90% Nil 54 days

0800 9525252

Best-value-perk cards

GM Card MC/Visa 20.90% Nil 52 days

0345 462777

Rebate points worth 3% of what you spend. Exchanged for money off a new Vauxhall car. Example: pounds 90 off a new car for a pounds 3,000 spend.

Goldfish MC/Visa 19.80% Nil 52 days

0345 609060

Points worth 1% of your spend for discounts off British Gas bills and shopping at Asda, Boots and Marks & Spencer. Example: pounds 30 off gas bill for pounds 3,000 spend.

Sainsbury's Classic Visa 20.90% Nil 50 days

Reward points exchanged for discounts off Sainsbury's shopping or Air Miles. Example: pounds 30 off Sainsbury's shopping or 480 Air Miles for a pounds 3,000 spend. Free travel insurance up to pounds 50,000 a year. Free purchase protection for 100 days. 250 Reward points can be exchanged for 40 Air Miles.