A simples guide

What is the best credit card for me?

There’s no doubt that credit cards can be a very convenient way to pay for things. However, unlike debit cards, where the money is actually taken from your current account to pay for your purchase, spending on a credit card is essentially borrowing money to pay for your purchase and paying it back at a later date.

As you make purchases on your credit card you build up debt. This will need to be paid off by a certain date to avoid being charged interest. Failing to pay the amount off before this date could result in high interest charges. At the least you need to meet the minimum monthly repayments set by your bank each month (but don’t forget you will be charged interest on the rest of your outstanding balance so only make the minimum payment if that is all you can afford to do.)

Used sensibly, with balances cleared every month, credit cards can be a useful way to shop, helping you to build up a credit history (useful if you want a mortgage in the future) or even earn points through schemes such as Avios. Used irresponsibly, they could see you run up expensive debt very quickly. Unless you have a special deal there’ll be interest to pay on the outstanding debt, as well as penalty charges should you fail to make the minimum repayment or your repayments on time.

There are a wide range of cards on offer at the moment each with different advantages. Which is best for you will depend on your individual circumstances. Here we’ll run through the different kinds of cards on offer to help you make your choice.


Cards charging low rates of interest

Cards that charge low rates of interest are often known as low APR cards. APR stands for ‘annual percentage rate’. This is the yearly rate of interest that you’ll pay on your credit card. It also takes into account any standard fees or charges which makes APR’s a good way of comparing cards.

Low APR cards currently charge around 6% to 8% interest compared to 18% to 23% with other cards (correct as at 30th May 2016).

credit cards

Cashback cards

Cashback cards allow you to earn money back as you make purchases. Each cashback card has its own scheme as well as its own terms and conditions. As an example, some cards might pay you 1% cash back whenever you spend in a supermarket. Others might stipulate that it’s 1% in a certain supermarkets and 0.5% elsewhere.

These types of cards can be useful in a situation where you’re regularly spending money in the same store. The APR’s on these cards are around 18% (correct as at 30th May 2016) so it’s a good idea to make sure you clear the balance each month. Failing to do so would mean that the interest would soon swallow the cashback you’ve earned!

credit card

Reward cards

Rather than giving you cashback on your spending, reward cards offer a different incentive to spend. Some cards issued by the major supermarkets offer you points in their various reward schemes. Other cards of this type offer Avios points or air miles on specific airlines, which can be helpful if you travel frequently.

Some reward cards have annual fees, so be sure to check the T&Cs as well as the APRs and make sure you’re happy that the advantages still outweigh the costs in your circumstances.

0% cards

There are three types of 0% credit cards.

Those offering 0% interest on balances transferred from other cards. This can be a useful way of paying off a debt that you built up elsewhere.

There are cards that offer 0% on new purchases for a period of time which may help you finance a big purchase such as a car

Finally there are some cards which offer a combination of both, allowing you to transfer over a balance at 0% whilst also making new purchases with no interest payable.

Obviously these cards have significant benefits, essentially allowing you to borrow interest free for a period of two years or more in some cases.

You must ensure that you meet the minimum repayments and that you clear the debt within the 0% period. Otherwise any remaining debt will convert to the cards normal rate and you will be charged interest!

Credit building cards

If you’ve a poor credit history or you’ve no credit history at all, the cards above are unlikely to be available to you. There are though, some credit building cards that may be available.

You’ll probably find that they’ll charge you a higher APR than some other cards and offer lower limits, but as long as you clear your debt each month, you’ll pay no interest. You may have to start with a modest credit limit until you prove that you can repay your debt on time. After this your issuer may be willing to increase the limit if you need it.

The advantage of using a card like this sensibly is that it will help you over time, repair or build a good credit rating. This won’t happen overnight so you’ll need to be patient and keep meeting your obligations.

There’s no easier time or place to compare credit cards than right now, here, with us. We have over 200 different credit card deals, all conveniently categorised to help you find the one that is right for you. So get comparing and see how much you could save!

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