Today's credit card market offers such a wide and varied array of options for consumers that it can be easy to get overwhelmed by it all.
The standard way to judge credit cards has traditionally been on their Annual Percentage Rate (APR), but with such a range to choose from there are now a number of other variables which should be taken into account. So simply opting for the card which has the lowest APR may generally be the quickest method, but it is not necessarily the most financially astute.
When choosing a credit card, personal circumstances will be an important part of finding the card with the right qualities for you. For example, for long-term borrowers, the interest rate will be crucial, meaning that it may be best to switch regularly between cards to find the lowest rate. If you are the type of person who clears your bill religiously every month, then taking a card which offers a loyalty bonus or has no annual fee could prove a worthwhile investment.
Types of credit card
If you are looking to get a credit card it can be confusing as there are loads of different types available. Depending on your situation it can make good sense to understand which cards would be most suitable.
Interest free balance transfers
A credit card that offers interest free balance transfers can prove great value for money, by reducing the potential for racking up large debts over the course of a few months. Consumers who are looking for the best deals and keen to keep their repayments low may find it useful to opt for a credit card offering 0% on balance transfers, as this can provide you with a good way to clear your debts without always having to catch up with interest repayments.
Credit card providers propose different lengths of interest free periods, with some offering only a few months while others will give up to a year's interest free on transfers.
Having said that, it is important to remember that in most cases interest free balance transfers are just that so any new purchases you make on your card will have interest added to it. It is therefore clearly important to be careful in the way you use an interest free balance transfer, otherwise you may find yourself simply adding to your debt.
Many banks also run special offers. Canny consumers can use these special offers to reduce their debts, taking advantage of the lower rates before moving on to other special deals. For example, it may be possible to obtain a special debt-transfer offer, providing the opportunity to pay off existing debts at a reduced rate. While new spending may not be covered by the deal, it can offer the chance to get your finances back into order and avoid being swamped by interest repayments.
0% percent on new purchases
Some credit cards offer 0% on new purchases, which can prove to be a real blessing for many consumers. One of the problems of buying on a credit card can be the additional cost of interest on the purchases before they are repaid, but cards which offer 0% on new purchases can significantly reduce the potential for racking up large debts over the course of a few months.
Some cards offer as much as 59 days interest free between buying an item and having to pay for it, meaning that you do not have to wait until payday to purchase the product.
Cashback credit cards
Some credit card companies have spotted the demand in shops for cashback options and have introduced their own such schemes. Some firms offer, for example, £1 cashback for every £100 spent and this can soon add up to a healthy saving if you use your card to buy in bulk.
As such, those who rarely use their credit cards except for large purchases may find cashback schemes are the most beneficial to them.
Platinum and gold cards
Once seen as a status symbol, platinum and gold credit cards are now offering consumers more perks than in the past to ensure that people remain interested. With so much choice today, consumers are more interested on finding the best deal than the shiniest card. Typically, the best perk offered by gold or platinum cards is free annual travel insurance, which can prove useful for frequent flyers. It is usually necessary to travel a lot to make the deal worthwhile, so if you are a once-a-year traveller these cards may not be for you.
It is also important to note that the majority of gold cards will also come with a minimum income requirement.
Loyalty cards
Other special deals include loyalty reward schemes which can see credit card holders rewarded when using their card. Frequent flyers, for example, would benefit from credit cards offering air miles.
Many shops are now offering their own credit cards, with various major retailers keen for their credit card holders to spend in their stores and as such will offer points or rewards in the shape of vouchers for money off their products. These can prove useful for regular shoppers at such stores, for example a person who does their weekly shop at certain supermarkets will soon rack up points, while someone who only occasionally buys from there would be better off looking for an alternative card.
To compare credit cards from the UK's leading providers click here.
Author: KYM Editor
knowyourmoney - company information
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