The Right Card For You
Different credit cards will suit different people. The best credit card for you will depend upon how you intend to use it. Before you choose a credit card you should decide why you want it and how you intend to use it.
What do you want your credit card for?
- just to pay for things and not for credit at all – you intend to pay off your bill in full every month
- to spread the cost of spending over a number of months
- to take advantage of special offers
- for emergencies - as a standby to give you easy access to credit if and when you need it
- to support a charity or other organisation.
What are the most important features for you?
- the interest rates – for purchases, balance transfers, cash advances and credit card cheques
- the length of the interest-free period for purchases
- incentives and benefits such as cashback, rewards or loyalty points
- being able to manage your account online
- using your credit card when you are abroad
- the availability of credit card cheques.
Once you know what you want a credit card for, and what benefits are most attractive to you, you can start to look at the different credit cards that are available.
Asking yourself the following questions may also help. Be completely honest with yourself in assessing how you expect to use your card:
- Will I always clear my bill in full each month?
- Will I borrow occasionally?
- Will I usually only pay part of the bill?
- Will I use my card to get cash advances?
- Do I want to buy a number of large value items that I can pay off over the next six months (e.g. when furnishing a house)?
- Do I want to reduce the interest payments on my existing card(s)?
- Do I travel abroad often and rely on my credit card to cover my expenses while I am away?
Will I always clear my bill in full each month?
Then the interest rate for purchases is less important for you as you will not usually incur any interest at all. You should consider the annual fee (if there is one), the length of the interest-free period and perhaps any rewards or cashback offers.
Will I borrow occasionally?
Then the interest rate for purchases will be more important as you will be paying interest when you borrow. You should also consider the length of the interest-free period and the annual fee (if there is one). You will now be balancing a number of features, so think carefully about your choice before committing to one card or another.
Will I usually only pay part of the bill?
Then the interest rate is very important as you will pay interest most of the time. You should consider both the standard rate as well as any introductory rate.
Will I use my card to get cash advances?
You should consider the interest rate and fees for cash advances. Typically, credit cards have a higher interest rate for cash advances than for purchases, and are usually a more expensive way of obtaining cash than, say, from a current account.
Do I want to buy a number of large value items that I can pay off over the next six months (e.g. when furnishing a house)?
Then consider whether there is an introductory interest rate. If you plan to use the card after the initial period and anticipate that you won’t be able to pay off the full balance each month then you should also pay attention to the standard interest rate.
Do I want to reduce the interest payments on my existing card(s)?
Then consider transferring your balance to a new card with a lower interest rate for balance transfers. Check what interest rate is offered for balance transfers and any related fees. Again, if you plan to use the card after the initial period and anticipate that you won’t be able to pay off the full balance each month then you should also pay attention to the standard interest rate.
Do I travel abroad often and rely on my credit card to cover my expenses while I am away?
Then, as well as the interest rate, you should also be looking at the fees for transactions in foreign currencies.
Credit card users DO change their payment habits over time, and so you may find that you move from using your credit card in one way to using it in another way, or that the features that are most important to you have changed. This is something that you should consider when choosing your credit card, so you might decide to select a card that offers you a good overall package of features. Alternatively, you might prefer to apply for another credit card better suited to your changing needs at some time in the future.
