The Rate Tart

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Let me start by saying that everyone's circumstances are different. With that disclaimer firmly in place, let's talk turkey.

Say you spend around £1,000 a month on credit cards, and you can afford to pay off this amount in full every month. Over a year, a cashback credit card will leave you more than £100 worse off than a 0% on purchases card.

Here's the maths. A yearly spend of £12,000 on a typical cash back card would earn me 4% cashback for 3 months and 1% for 9 months. Assuming I pay off the total debt each month, that would give £210 cash back.

The same spend on the Natwest 0% credit card paying a minimum of 2% of my balance each month would mean that I need to make payments of £1,236. At the end of the 12 months, I'd need to make a final payment of £10,764 to clear the outstanding balance.

So, instead of paying in £12,000 over a year, I can pay just £1,236 and invest the rest in high interest savings account. Assuming I used the IceSave account at 6.30% AER, this would earn me more than £300 over the next twelve months and make me more than £100 better off.

Of course, this is a more risky strategy and means I have to be on the ball with my repayments. Equally, I have to avoid the temptation to withdraw cash, use credit card cheques and overspend because if I did, I'd end up paying fees and charges. And that would quickly overtake my £100 saving.