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How to Choose a Credit Card
If you’re considering taking out a credit card deal, it makes sense to consider all your options. There are many reasons to consider a credit card: maybe you want to spread the cost of a large purchase or transfer a high-interest balance onto a 0% interest card, or perhaps you want to earn rewards or cashback. Whatever your reasons, there’s likely to be a card for you, providing you meet the criteria set out by the credit card provider.
You can use the credit card comparison service linked to above to find a deal that looks right for you. Our simple guide to credit cards may also help you choose an appropriate option and answer questions you may have about credit cards.
Remember that credit cards offer a form of borrowing and that you will be expected to make monthly payments onto the card. If you miss payments, you could end up paying extra interest charges and fees and your credit record could be affected.
Credit card features
There are various types of credit card on offer:
- Cards with 0% interest on purchases: Credit cards offering 0% interest on purchases for a set period of time can be a good option for those who want to use their credit card to pay for high cost items. Borrowers can sometimes access free credit if they pay for items with a 0% interest credit card and repay the full balance within the 0% interest-free period. After this initial interest-free period has expired, the interest applied will usually revert to a higher rate, which can prove costly if you still have an outstanding balance.
- Cards with 0% interest on balance transfer: Cards that offer 0% interest on balance transfers can be useful for those who have a balance on another credit card that is costing them money in interest. Ideally, borrowers would then repay the balance transferred before the end of the interest-free period in order to avoid being charged a higher interest rate.
- Rewards credit cards: When used in place of your debit card, or cash, a rewards points credit card can allow you to earn rewards for your everyday spending habits. The card that you choose should depend on your specific needs and circumstances. For instance, if you travel frequently, a card which offers points that can be redeemed for airline miles could help you save money. Alternatively, points from other cards may be put towards anything from cinema tickets to restaurant bills.
- Cashback credit cards: Some credit cards offer cashback on purchases from certain retailers. Providing you are able to pay off your balance each month to avoid incurring interest charges, you might save money when using a cashback credit card for everyday spending.
Credit card eligibility
To be accepted for a standard credit card you will usually have to meet certain eligibility criteria in the form of credit rating checks, employment status checks and affordability assessments. Your interest rate and credit limit will also depend on the outcome of credit checks.
You may be able to get a credit builder card even if you have a less-than-perfect credit score. These often come with higher interest rates and lower credit limits, but they can be a useful way to access a credit card and build your credit rating up.
Choosing a credit card FAQs
How much do credit cards cost?
It pays to carefully look at the interest rate you are offered, as well as other charges and fees, to work out how much it will cost to use a credit card. Borrowers who pay off their balances each month can often avoid any costs and can also benefit from features like cashback and rewards.
What is a credit card minimum payment?
The minimum payment is the amount a credit card issuer requires you to repay onto your card each month. If you miss this minimum payment, you could be charged a penalty, as well as more interest charges, and your credit score could be affected. Ideally, you would repay your balance in full each month in order to avoid paying interest on your balance.
What will my credit limit be?
The credit limit offered by a credit card issuer will depend on their assessment of your financial situation. The stronger your credit rating and debt servicing history, the more you will be offered.
What does 0% interest on balance transfers mean?
This means that you can transfer the balance from another credit card onto a new card and pay no interest on that balance for a set period of time. Within that timeframe, you will be expected to pay the minimum monthly amount in order to avoid interest being charged or penalties being imposed.
If you still have an outstanding balance at the end of the 0% interest period, you will be charged interest at a normal rate, as quoted by the credit card issuer.
What happens if my credit card application is rejected?
It’s a good idea to try to establish whether you will meet the lending criteria before applying for a card. This is because your credit record can be negatively affected if you apply and fail to be approved. You can check your credit limit through organisation like Experian, and you can also use an eligibility checker tool to help you avoid being refused credit.
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Helpful links for credit card issues
Money Advice Service - The government's Money Advice Service website provides concise, unbiased information on choosing and using credit cards as well as handy tools such as credit card calculators.
The UK Cards Association - The British trade association for card payment companies has an extensive range of guides on their website covering all the types of payment cards available to UK consumers including debt, credit and prepaid cards.
Financial Fraud Action (FFA) UK - The Financial Fraud Action website features important advice on using payment cards safely and securely as well as information on the latest scams.
Financial Ombudsman Service - If you've already made a complaint to your card provider and have not had your issue resolved satisfactorily then the next step is to take up your complaint with the Financial Ombudsman.