Ensuring you get the best value out of your credit card

Most of us probably don’t strategically plan how we use our credit cards – it’s more a question of, you see something, you buy it – perhaps with your credit card, perhaps with cash. But making a more informed decision about how to use your credit card could mean that you earn cash, rewards or make some valuable savings – so here’s how to make your credit card work for you.

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What are the different types of card on offer?

Getting a new credit card can be a minefield, there’s a lot of them and they all sound great – but which one’s going to be right for you? You’ll need to be honest with yourself and think about how you manage your money because there’s no point having a super duper credit card with the greatest rewards in the world if you’re in the habit of not paying off your bill in full each month. Because any rewards you do get will be swallowed up in the interest you end up paying back.

Balance transfer cards – If you’ve got an existing credit card debt, it’s worth comparing the market to see if you can find a card that offers better repayment terms. There are a range of cards offering 0% on balance transfers which means you won’t be charged interest on your outstanding balance every month (the one that you transferred anyway!) This can help you pay back what you owe quicker and save you money in the long term. But watch out for balance transfer fees as you might have a one off charge for moving the balance.

Reward cards – These offer you rewards such as store vouchers, air miles or days out. Some are specific to a store so if you always shop at the same places it’s worth considering one issued by your favourite high street haunt as you could be able to  earn points or vouchers to use instore.

Cashback cards – These literally give you cash back on what you spend, so you’re incentivised to spend more – but that shouldn’t be an excuse to go mad. Your cash reward is usually given back to you annually and often taken off your outstanding balance .

0% on new purchases – This means you can buy stuff without paying interest on the outstanding balance for a set period of time.  For example, if you want to buy a new pair of shoes but know you can’t pay off the balance until your bonus gets paid in a few months then you won’t be charged interest while you wait. Just remember, you still have to make the minimum monthly payment and the interest free period is usually fixed so don’t forget to pay it off before the interest free period ends. You can also find cards that offer 0% on new purchases and balance transfers.

Bad credit cards – These haven’t been consigned to the naughty step, they’re designed for anyone with a poor credit history and used properly they can help you get back on track when it comes to credit.

Getting the most out of your credit card rewards

The best way to use your credit card is sensibly. We know – it’s boring but sadly, it’s true. But to get the best out of your credit card – whatever it’s offering – you’ll need to stick to these top tips:

  • If you can, pay off your credit card bill in full on time every month – this means you’ll avoid paying interest and enjoy the full benefit of any rewards.
  • If you can’t pay off in full, pay off as much as you can on time (and definitely the minimum amount).
  • If you’re the forgetful sort, set up a DirectDebit so you never miss a repayment – it’ll help you keep on top of your money and means you won’t get a big, black mark on your credit report for missed payments.
  • Don’t get cash out on your credit card – the interest charged is often much higher than for standard purchases.
  • If you’re going away, ensure you have a card that doesn’t charge you for use abroad, otherwise you could come home to a hefty unexpected bill.
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How long should I keep my current credit card?

It’s a harsh truth but loyalty really doesn’t pay. Credit cards are a competitive market and you can stay ahead of the game by regularly comparing the market for the best deals. Credit card providers are always on the lookout for new customers and there’ll often be a host of tempting offers.

But changing your credit card more often than your socks, isn’t always a good thing. Having a long(ish) financial relationship, shows that you’re suitably sensible and grown up to manage your money with stability and maturity. It might be yawn inducing, but lenders want their money back so the safer risk you are, the better your chances of getting credit, a loan or a mortgage.

It’s worth aiming to change your credit card every couple of years – just to make sure you’re getting the very best deal possible. 

How do I choose?

Choice – it’s a wonderful thing but sometimes when you have too much of it, it’s overwhelming. Which is why we’ve broken our credit cards down so you can search by type – whether that’s 0% on transfers and new purchases or getting cashback or rewards – or if you fancy a bit of pot luck you can simply search all the cards on offer; however you search, it’s easy when you comparethemarket.com

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