How do I know which credit card is right for me?
With so many different credit cards on offer, it can be tricky to work out which card is best suited for your needs.
It’s important to remember that different cards come with different features, and are designed for different purposes. That means you need to work out exactly what it is that you’re looking for from your credit card before beginning your search.
With a price comparison site such as MoneySuperMarket you can quickly see which cards are best for you, whether you need to make the most of interest-free borrowing or want to earn rewards on your spending.
Why are there so many different credit cards?
There are a number of different types of credit card, each of which serves a different function.
For example, there are 0% purchase credit cards, which charge no interest on the purchases you make on the card for a set period, such as 12 months. Longer interest-free periods are available.
These can be particularly useful if you have a big purchase on the horizon, such as a new boiler or a wedding, and need to pay it off in chunks.
There are also 0% balance transfer credit cards.
These allow you to transfer over a balance from an existing credit card, which you may be paying interest on, and charge no interest on your balance for a set period, again measured in months.
With these cards, you can pay the balance off during this period without having to pay interest.
If you want to benefit from a low rate of interest for a lengthy period, then some lenders offer low rate credit cards.
For borrowers that can clear their balance in full every month, there are also rewards credit cards.
These cards actively reward you for spending on the card, though the rewards come in various different forms. Some will pay you cashback, while others may offer loyalty points, such as Clubcard or Nectar points.
If you don’t have a credit record, or you have one that needs improving, then there are credit builder cards. These are designed to help you demonstrate that you are a competent borrower.
What is the APR and does it matter?
APR stands for Annual Percentage Rate, and essentially shows you how much your borrowing will cost over the course of a year.
The APR isn’t just made up of the rate of interest you’ll pay - it also takes into account any additional fees and charges you may have to pay. It can be a useful tool for comparing cards.
Bear in mind that when you see a credit card with a representative APR figure, even if you are accepted for the card, you may not actually be offered that rate.
That’s because lenders are only obliged to offer the representative APR to 51% of successful applicants. So you may be charged a higher rate.
If I apply for a credit card, can I change my mind?
Yes. You have a 14-day cooling-off period from when you receive the card to tell the lender that you have changed your mind and withdraw the agreement.
You will need to clear any outstanding balance you have built on the card within 30 days.
How long will it take to get my credit card?
If your application is successful, you will normally receive your new card and PIN in a week or two, though the exact time may vary between lenders and at different times of the year.
You will often then need to ‘activate’ the card before you can start using it. This generally means calling an automated number.
This is an anti-fraud measure in case your card is intercepted in the post.
Can I get a credit card if I have a bad credit rating?
The best credit card deals are reserved for borrowers with impeccable credit ratings. But don’t panic if your credit record has the odd blemish - a number of credit card providers have cards specifically designed for you.
Used properly, these can actually help you improve your credit profile by allowing you to demonstrate that you can use credit responsibly.
What is a balance transfer fee?
When you transfer a balance from one credit card to another, you will generally have to pay a transfer fee.
This is worked out as a percentage of the balance being transferred. So if you are moving £1,000 from your old credit card to a new balance transfer card, and it has a 3% balance transfer fee, you will have to pay £30.
Some balance transfer cards don’t charge a transfer fee, though the 0% interest periods they offer tend to be considerably shorter.
What happens if I don’t keep up with my repayments?
Failing to make your repayments is not a good idea. For starters, the lender will be able to withdraw any 0% offers on the card and immediately begin charging interest on your balance.
On top of that you’ll be charged a missed payment fee (typically £12), and you’ll get a black mark on your credit record too. That will make it harder and potentially more expensive to get credit in future.
What happens if I get turned down for a credit card?
If you are turned down, the worst thing you can do is immediately start firing off applications to a host of other lenders.
Each time you apply for credit, a ‘footprint’ is left on your credit history. If lenders see a host of footprints on there when they come to judge your application, they are likely to take an unfavourable view.
It is worth getting in contact with the lender to find out why they turned you down. It may be down to a simple error in your credit history.
You might want to take out a free trial with one of the UK’s credit agencies (which you can find online) to see what information they have for you, to ensure it is all accurate.
If you use the MoneySuperMarket Smart Search facility, you can search and apply for credit cards without leaving a trace on your credit files.
How do I increase my credit card limit?
If you want to increase your credit limit, you will need to speak to your lender. If you have been a customer for a while they will know what you are like as a customer so may be more likely to approve your request.
If you want a higher credit limit, you will need to ensure you have the best possible credit score.
Is there any point getting a credit card if I don't need to borrow?
Credit cards come in very useful, even if you don’t necessarily need to borrow.
For example, put all of your regular spending on a rewards credit card, then clear off the balance in full each month, and you can enjoy additional loyalty points or cashback.
You also enjoy additional protection when you spend over £100 on a credit card, thanks to Section 75 of the Consumer Credit Act.
This legislation ensures that if anything goes wrong with your purchase, the credit card provider is equally responsible for refunding you. So for example, if you book a flight and the airline goes bust, you’ll still be able to get your money back from the credit card firm.
Can I pay off my credit card debt early?
Absolutely - unlike with a personal loan, there are no penalties in place for paying off a credit card debt ahead of schedule.
A credit card may have a three-year 0% period for example, but that doesn’t mean you need to take three years in order to clear the balance.
What is a money transfer?
A money transfer is a function offered by some balance transfer credit cards.
Rather than transferring a balance from one card to another, a money transfer allows you to borrow on your credit card and move the money to your current account.
It’s one way to clear your overdraft, meaning you can escape punitive overdraft charges, and can instead clear that debt in stages over a 0% interest period.
Can I get a joint credit card?
Not exactly. What you can do is add further cardholders to your credit card. So for example if you snap up a rewards credit card to cover all of your regular monthly spending, you could add your partner as an additional cardholder on the same account. That way you can earn even more rewards.
Bear in mind that it is still the primary cardholder who is responsible for paying off the debt.
Can I use a credit card for cash withdrawals?
Yes you can, but it’s a bad idea. You’ll be charged an even higher rate of interest (around 25% is typical) on the money you withdraw, and what’s more that interest is charged from day one – there is no interest-free period, as with a normal purchase.
On top of that, you’ll also have to pay a cash advance fee, which is usually around 3% of the money withdrawn.
Withdrawing cash with your credit card should always be the absolute last resort.
How do I cancel a credit card?
Cancelling your credit card is very simple. You just need to call your credit card provider and explain to them that you would like to close your account.
Can I use my credit card abroad?
Yes, though it can be costly. Traditional credit cards will whack you with all sorts of additional fees if you use them overseas.
However, there are a number of credit cards specifically designed for use abroad which don’t charge these fees. So if you know that you are heading abroad and are likely to need to use a card, it’s worth finding a specialist overseas card beforehand.
Will the interest rate on my credit card change?
It might. Credit card providers are within their rights to change the interest rate charged on your card at any time, irrespective of what’s happening with the Bank of England base rate.
As a result, it’s a good idea to always pay off your credit card balance in full every month, unless you are in the middle of a 0% period.
What’s the difference between a credit card and a prepaid card?
With a credit card, you are borrowing the money that you spend. That money then has to be paid back, potentially with interest on top.
With a prepaid card you have to load money onto the card before you can start using it. So you are simply spending money that you already have.