What type of credit card is best for me?

Choosing your credit card

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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.

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What is a credit card?

A credit card is a plastic card that gives you access to credit that you can use in a number of different ways, depending on the type of credit card you get. You’ll have to repay at least some of what you borrow each month, however you might be able to avoid paying interest on your balance if you pay back in full and on time.

How do credit cards work?

If you’re successful in applying for a credit card, your lender will set your credit limit and an actual interest rate. This will reflect your own personal finances, including your income and credit history. You’ll get the card in the post, which you’ll need to activate before you can use it.

When you use your credit card, you’ll build up a balance that you have to pay back. You need pay back at least part of it every month. You can stick to making just the minimum required monthly payment, which will let you avoid any late fees or charges. However, this will mean you’re likely to pay more interest than you would by paying in full.

Depending on the type of card you have, you may also have to pay other fees for:

  • Cash withdrawal
  • Foreign use
  • Exceeding your credit limit
  • Balance transfers
  • Money transfers
  • Certain incentives or benefits

As you continue to use your card and pay back what you owe, you’ll build up a good history which can give you access to better interest rates and bigger loans in the future. You may also be able to increase your credit limit if you’ve proven to your lender that you can borrow money responsibly.

Should I apply for a credit card?

As long as you use your credit card sensibly it can be a useful financial tool, especially in terms of planning for the future. However, submitting an application for a credit card leaves a mark on your credit report – whether it’s successful or not – and too many of these can put lenders off.

This is because repeated credit or loan applications can make it seem as though you’re in desperate need for credit, and lenders may feel you’re at risk of not being able to pay all your debts.

You should therefore take the time to consider your application carefully, making sure there are no mistakes on the application or your credit file. To do this you can contact credit reference agencies to check your own file for any errors.

It’s a good idea to do what you can to improve your credit score before applying for a new line of credit, as this will give you a higher chance of being accepted. MoneySuperMarket also offer an eligibility checker that lets you know how likely you are to be accepted for different credit products, which can help you pick and choose your applications.

What type of credit card should I get?

The type of credit card you’ll be best suited for will depend on why you want or need it. For example:

If you already have an existing debt

You may be able to benefit from a balance transfer credit card if you have an existing balance that you want pay off quicker or with less interest. Many balance transfer cards come with low or 0% interest periods. That means you’ll be able to transfer your existing debt onto the new card and pay it off at the new lower rate.

If you want to build a credit history

Credit builder credit cards can be useful for people with a poor or limited credit history. It’s generally easier to qualify for as they are targeted towards those who wouldn’t normally qualify for other credit cards.

These cards generally come with a higher interest rate and a lower credit limit, but if you use them carefully and repay everything you owe in full and on time every month:

  • You’ll avoid paying interest on what you owe, effectively making your credit card a way to get an interest-free loan
  • You’ll also build a level of trust with your lender, therefore also building up your credit rating and making it easier to qualify for better credit products in the future

If you want to use it on holiday

Most credit cards carry foreign use charges, but you might consider an overseas credit card if you plan on using one while you’re on holiday. These credit cards come without charges for using them in a different country, meaning they can be a useful way to manage your holiday spending.

For example, using an overseas credit card can mean you don’t need to carry as much cash around with you, and you don’t have to worry about running out of money while you’re abroad. However, you should still be wary of exceeding your credit limit or making late payments, as this will still result in a fee.

If you want to use your card for purchases

Purchase credit cards often have a 0% interest period in which you can pay for your shopping with your credit card and avoid paying interest on what you owe, as long as you pay back in time. They can be useful for spreading the cost of expensive items over a few months.

They also offer protection for your purchases, thanks to Section 75 of the Consumer Credit Act. This holds lenders equally as liable if something goes wrong with your purchase. For example, if the company you bought from goes bust, or if your goods and services don’t arrive.

If you want to earn rewards when you use your card

Taking out a reward credit card can give you access to a number of useful benefits and incentives as part of your credit agreement. For example:

  • A shopping or store credit card can get you vouchers or in-store points for your favourite shops as you use the card
  • An airline credit card can get you airmiles that you can put towards flights as well as access to airport lounges
  • A cashback credit card can give you cash every time you spend on the card

However, these cards can often charge a fee for access to these benefits, and if you miss any monthly payments you may lose the benefits altogether.

If you want to use the card to get cash in your bank account

A money transfer credit card works in a similar way to a balance transfer credit card, but rather than using your balance to transfer a debt you can transfer money into your current account. These credit cards often come with low or 0% interest rates, which essentially means you can use it as an interest free loan to:

  • Pay off the overdraft in your current account
  • Pay off another loan at a lower interest rate

As with other low or 0% interest credit cards you have to pay back at least the minimum amount each month or you could be placed on the lender’s standard rate instead.

Compare credit cards

Whichever type of credit card you want to apply for, if you compare deals on MoneySuperMarket it’ll be easier to find the right card for you. All you need to do is tell us a little about your finances, including details about your income and what you want to use your new card for.

Then we’ll give you a tailored list of credit cards which you can sort by interest rate, any fees and charges, and how likely it is that you’ll be accepted if you apply. This can help you keep your credit intact as you can minimise the chance of being rejected and therefore having to apply again in the near future.

Once you’ve found the card you want, just click through to the provider to finalise your application – and be sure to check there are no mistakes when you apply, or you’ll risk being refused just because of admin issues.

If your lender accepts your application, they’ll send you your card in the post along with your own credit limit and interest rate. Remember the advertised APR only has to be offered to 51% - the actual rate you’ll be given will depend on your own personal financial circumstances.

When you get your card, you’ll just need to activate it and it’ll be ready to use.

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