Are you finding it hard to decide which credit to sign up for? This article is here to make the search a lot easier for you.
There are about 60 million credit cards in the UK and they are a common way for many people to afford big ticket purchases. But what makes a credit card right for you and your circumstances?
The short answer is that you can shop around easily on price comparison websites. These are worth their weight in gold when it comes to exploring dozens of different providers with the click of the button.
Yet you still have to know what you actually want. A good deal is only really ‘good’ if it delivers what you want it to.
Here are five top tips to bear in mind when searching for a credit card:
Work out the true cost of borrowing
It pays to know the full cost of taking out a credit card and this is where the ‘APR’ comes in. The annual percentage rate, as explained by the Money Advice service, includes the interest rate and any monthly or annual fees – although doesn’t take into account introductory offers or balance transfers.
Providers have to use this figure in their adverts and it is calculated in a way that is spelled out in law. This gives you a handy number to use to compare two cards – the higher the percentage, the more you can expect to pay when using the card.
However, you also need to keep an eye out for ‘representative APR’. Sometimes lenders will base the interest rate on your credit rating so while the representative APR will be offered to at least 51 per cent of customers, you could have a rate that is much higher.
Could you use the interest free period?
Many credit cards will come with an introductory interest free period. The longest one of these available is 43 months as part of what some newspapers have dubbed a ‘credit card war’ to try to win customers.
These periods can be a very sensible way of using a credit card. Imagine you’re paying £2,000 for a holiday, for example. If you pay for this on a credit card with an 18-month interest free period, say, then you could pay a little over £110 a month.
This is a great way of spreading out the cost, whilst not paying a penny in interest. By paying up in full before the interest free period ends, you’ll have benefited from a cheap form of borrowing.
Have you got a balance to transfer?
Another common form of introductory offer surrounds a balance transfer – the moving of debt from one credit card to another.
If you’ve got credit on a card that is about to come to the end of its interest free period or is accruing a high rate of interest, you may choose to move this balance over to another card and pay it off on better terms.
Balance transfers can carry fees and charges outside of offer periods – check this before you carry it out to make sure you’re getting a good deal.
Would you gain from an added benefit?
These aren’t the only offers available to new credit card customers. Many cards will offer added extras such as travel insurance, store loyalty points or even cashback when you use your card.
It’s important to check the terms and conditions of these offers but if you do that and find that they’ll save you some money then they can be lucrative little bonuses.
Are you off on holiday?
Do you want to take your card on holiday? Sometimes it’s nicer – and safer – to pop the plastic in your wallet than walk around a strange place with a fistful of cash in your pocket. If that’s the case, however, you need to check the fees and charges that relate to transactions made overseas.
There are two types to watch out for: a conversion fee on every use of your card and a withdrawal fee every time you take cash out. It is possible to find cards that either don’t charge for this or offer a lower rate. If a holiday is in your sight, search these out.