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What type of credit card is best for me?

By  , last updated

Credit cards are a convenient way to pay for a whole range of purchases, from a handbag to a holiday. They provide protection on purchases between £100 and £30,000 and can, depending on which card you apply for, be an effective way to clear expensive debt.

But remember that, when you use a credit card, you are borrowing money. And as credit card interest rates tend to be among the highest in the lending arena, you could end up with a very expensive debt unless you manage your debt carefully. 

How do credit cards work?

Your credit card issuer will send you a bill every month with a list of all your transactions. If you pay the bill off in full, there is usually no interest to pay, so the card works like an interest-free loan.

But if you cannot afford to clear the debt each month, you could start to pay interest at a rate of about 19%. In other words, credit cards can be expensive, and they are not a way to manage a long-term debt.

Watch out for card costs

Most credit cards charge penalty fees for late or missed payments. You will also be charged if you spend more than the agreed limit.

You should also watch out for charges at the ATM. Most credit card firms charge a fee of about 2% for cash withdrawals. There is usually no interest-free period, either, so you start to incur interest immediately.

Remember also that, if you just pay off only the minimum payment each month, it could take years to clear your debt and cost hundreds or even thousands of pounds in interest.

Our credit card calculator will help you work out how long it will take you to pay off your credit card based on your current minimum payments. You can also find out how your monthly payments will be affected if you have a date in mind when you want to clear your balance by. 

Which card is best for me?

There are hundreds of credit card deals on the market, but they fall broadly into six categories. The best card for you depends on a number of factors, including whether or not you will pay off the balance each month, and how you intend to use the card.

Reward cards

There are three main types of reward credit cards: cashback cards, ‘airmiles’ cards and supermarket loyalty cards.

Many of the cards are only available to those with top notch credit scores and will require a minimum amount of spending each month. 

Best for: People who can pay off their balance in full each month. If you don’t, any benefits accrued will be cancelled out by the interest you’ll have to pay.

Compare: Reward credit cards

Borrow money for free

Credit cards with a 0% interest period for purchases are a great way to spread out the cost of paying for an expensive item.

The best card for you depends on a number of factors, including whether or not you will pay off the balance each month, and how you intend to use the card.

As long as you pay off the outstanding amount before the interest free period ends, the loan is free. It might be a good idea to set up a direct debit to make sure you pay off the balance before the interest free period comes to an end, otherwise the interest rate will jump up to around 18%.

You can get cards with interest free purchase periods of two years or even longer.

Best for: Those who have a big item to buy, such as a washing machine or sofa, where you might not be able to pay off the debt in full at the end of the month. 

Compare: 0% purchase credit cards

Switch your balance

If you’ve already got debt on an existing credit card, a 0% balance transfer card could be the answer. For a fee you can move the balance to a card where you will pay no interest for a fixed amount of time – well over three years, in some cases.

Watch out for transfer fees which are usually around 3% of the balance transferred and factor this into your repayment plan. You must pay it off before the 0% period ends or you’ll end up paying interest at as much as 18% on the remaining balance.

It’s worth noting that some cards with shorter interest free periods have lower transfer fees, so work out how long you think it will take to clear your outstanding balance before choosing which card you want.

Best for: Those with existing debts on a credit card.

Compare: 0% balance transfer credit cards

Low lifetime rates

Some people are happy to switch from one 0% deal to another, paying a fee each time. Others prefer the simplicity of a card that charges a low rate for as long as it takes to clear the debt. 

Best for: If you think it will take you longer than the interest free period to pay off your debt and don’t want to faff around finding a new deal once it’s run out. 

Compare: Low rate credit cards

Boost your credit score

Card issuers are fussy about their customers. They want people with a perfect or near perfect credit score, so if you have struggled with debts in the past your application could be refused.

That doesn’t mean the door is shut if you have a less-then-perfect credit history – there are cards available if you have a poor credit score. You should explore this option if you are consistently turned down for other deals.

These cards charge a relatively high rate of interest, but they can help you to improve your credit rating. If you manage your payments carefully, you can boost your score and hopefully qualify for a competitively priced card.  

Best for: Those who have bad credit or if you have never previously borrowed money, so have not had an opportunity to build up a credit history.

Compare: Credit builder credit cards

No or low foreign fees 

Most people take a credit card on holiday because it’s a convenient way to carry money – and can be particularly useful in an emergency. But most card issuers charge a foreign usage fee when you use your card abroad, so it can work out expensive.

Frequent travellers should therefore look for cards with either no or low foreign usage fees.  

Best for: Those that have frequent holidays

Compare: Overseas spending credit cards

How to find the perfect card for you

Once you decide what card is best for you, you can use Smart Search which helps match you to a card you’re likely to get accepted for. It assesses your credit history – without leaving a mark and thus potentially affecting your score – and gives you a percentage rating on how likely you are to get accepted for a card.

Where to next?

The advantages and disadvantages of having a credit card

How to get accepted for a credit card

Credit card decision tree: which card is right for you? 

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