How to Choose a Credit Card

Apr 27 2012

Most people own at least one credit card.  For some, credit cards are just a way of paying for things that they need and don’t think too carefully about how much they are paying in interest; for others, credit cards are a useful way of getting interest-free credit for a month before the balance is paid off in full.

What you look for in a credit card will depend on what you want to use it for.  Some people collect Airmiles or nectar points or similar reward schemes, and the more often they use their cards the greater the benefits are.  Some credit cards enter customers’ details into prize draws each time the card is used – so the more often the card is used, the better the chances of winning the prize draw.  These offers are normally more of interest to people who plan on paying off their balance each month in full – since otherwise the value of any special offers would be totally outweighed by the cost of interest payments on the credit card balance. 

Other people look for credit cards that offer an interest-free period.  These are useful for making major purchases.  If you buy, say, double glazing on your credit card then not only are you protected should the double glazing company go bust or not carry out the agreed work (since you can get your money back from your credit card) you also have longer to pay for the work if you spread the cost over a year without paying any interest. 

If you compare credit cards it will allow you to see which companies offer the best deal for how you intend to use your card.  If collecting rewards is important then choose one that offers those rewards and then use it as often as you can – on everything from a visit to the hairdresser to your weekly shop to buying a new car.  Be sure to check that you won’t be charged an annual fee and that there are no high-cost penalties for late payment of the minimum amount or any similar pitfalls. 

If having an interest-free period is more important then opt for one of those cards for the period of 0% APR and then change to another card or stop using credit cards altogether after that interest-free period ends.  Make all your necessary major purchases within that time (if you can buy as a ‘cash-buyer’ – albeit by using your credit card – rather than relying on a company for their interest-free payment plans then you increase your bargaining power to get a better deal on the purchase price). 

When comparing credit cards, if you can’t find a card offering 0% APR then obviously opt for the card offering the lowest APR and no annual fee.  Online comparison sites are very helpful in this regard as you can compare the APRs but also the other bonuses or enticements that each card has to offer. Having a credit card doesn’t have to result in credit card debt; just choose carefully and responsibly.

To compare credit cards, search online comparison sites but also check out credit cards offered by the major high street banks.  It’s safe to say that if an offer is sent to you, uninvited, in the post then if the offer looks too good to be true, it is.