Choosing a credit card

Having a credit card can be really useful in a number of ways. They’re good to have as a backup, especially in an emergency, and they are useful to help you spread the cost of a busy month or two. But they can also be an expensive way to spend, and some people can end up with a debt that they struggle to manage. So it’s very important to spend some time deciding which credit card is best for you. 

There are a lot of different types of card available, so it’s important to compare credit cards to get one that will suit your needs.  Luckily makes it easy to look at the options and make an informed choice. An important thing to compare is the Annual Percentage Rate (APR) on cards – we’ll talk about what this is in a moment.

How credit cards work

Once you’ve been accepted by a credit card provider, you’ll be sent a card that you can use in many shops, restaurants and other businesses in countries all round the world. You’ll be set a limit to your spending, and you’ll receive a monthly bill. If you pay off the full balance of the card each month, you shouldn’t pay any interest (subject to exclusions and terms of your card). But if you can only make a smaller payment, which needs to meet a minimum set out by the provider, you will have to pay interest on the balance left on the card.

The APR helps you understand how much it could cost you to use the card. The APR rate is one way to compare how much using a credit card will cost. So if the APR on a card is 17 per cent and you spend £1,000 on it, the interest and charges will mean that you are spending £170 on top of your debt. In the end, then, you will be paying back £1,170.Don’t forget there are other types of fees to take into account for example balance transfer fees or late payment charges.

Our credit cards page shows you the main eight kinds of credit cards. Let’s look at each of these in turn.

Zero rate cards

The first kind offers zero interest balance transfers. This could be useful if you have a credit card already and are being charged a lot of interest on the balance that’s outstanding. The new card will let you transfer your balance over and guarantees not to charge you interest on that amount for a set period of time, say 12 or 24 months. However, it’s worth noting that most cards will have a balance transfer fee that will be applied when you move the balance over.

Purchase Cards

There’s a second kind of zero percent credit card, which won’t charge you interest on what you spend for a set amount of time. After that point you will start being charged interest, so if you do run up a debt on the card it could become expensive.

Other zero rate credit cards may offer you both of those things - free balance transfers and zero interest on your spending. You need to check the details carefully so that you know exactly how long the offers last for, and there may be other terms and conditions.

One thing to pay attention to is introductory offers – where you might gain a better interest rate for a certain time period. Make sure you know when these end so that you don’t get caught out.

Rewards and cashback

The next two kinds of cards work differently. Rewards cards and cashback cards will both give you something back for spending money on the card. You might gain loyalty card points or travel points (like Avios), or receive money off your credit card bill, depending on how much you use the card each month.

These are not usually low APR credit cards, so they are best suited to people that usually pay the full balance on the card every month. If not, the interest you owe will probably be more than the value gained in your rewards.

Low APR cards

If you don’t pay your balance every month, the next kind of card could be useful. Low APR credit cards cost a lot less in charges and interest. Typical balance cards and rewards cards might have an APR of 15-25 per cent, while a low APR card might offer somewhere between 6 and 15 per cent.

In looking for the best low APR credit card for you, you could also find a zero percent balance transfer offer. So if you do have a balance on another card and needs to transfer it, this could be useful for you.

Bank cards and credit builders

There are two final kinds of card that we haven’t talked about – cards from your bank, and cards that build credit. Your own bank knows you and your history, and so might give you more credit than you get elsewhere. Meanwhile, if you have previously been turned down for a credit card, there are certain cards that help you improve your credit score and open you up to other card options in the future. These offer low limits, but stay within them and pay regularly and you’ll build up your credit rating.

If you’re asking yourself “which credit card is right for me?” one way to help stay debt-free is to have no credit cards. But we know how useful they can be. So use to help find the best low APR credit cards for you, whether it’s one offering a zero percent balance transfer or something totally different.

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