Picking the right credit card

With such a vast choice of credit cards on offer, how do you know which is the best deal for you? Mark Hooson explains which type of card is suitable depending on your circumstances…

If you’re thinking about getting a credit card, you should consider what you’ll be using it for because there are all sorts of different cards out there.

To help you pick one, here’s a look at the different types of cards on offer.

Clearing your debts

If you want to clear your existing debts, go for a balance transfer credit card.

You can lower your interest payments by shifting debt from an old card to new one with a 0% period.

The best balance transfer cards are offering up to 23 months interest-free, giving you some breathing space to clear your debts.

You’ll have to pay a one-off transfer fee, which varies from card to card

Making a large purchase

If you’re buying something expensive and want to spread the cost over time, a credit card is ideal.

Some cards offer 0% periods on purchases, so you can take your time clearing the cost of the purchase and avoid paying interest.

Credit cards also protect you better than a debit card or cash.

Anything you buy on a credit card worth between £100 and £30,000 is covered by the Consumer Credit Act.

If what you buy turns out to be faulty or doesn’t arrive, you can claim the money back.

The Consumer Credit Directive which came in last year also protects you on purchases worth £30,000 to £60,260.

So, if you’re planning on spending a large amount a credit card with 0% on purchases is a good idea.

Reward or cashback credit card

If you clear your credit card debts in full each month, you might as well get something in return.

Cashback cards give you a percentage of your spending back.

For example, some cards give you 3% back for buying fuel with your card, or 2% back on department store spending and even 1% back on supermarket spending.

You must pay your balance off in full each month though; because even one missed payment can be costly with APRs in the region of 18.5%.

Using a credit card overseas

Most credit card companies will charge you to use your card abroad, but there are a few exceptions.

Look for a specific card for using abroad, that way you won’t come home to a hefty bill.

What credit card should I look for if I have a low credit score?

The credit card market is extremely strict on criteria at the moment.

Rewards cards or 0% balance transfer cards might not be the best place to start.

There are cards on the market to help people with low credit scores though.

These cards aren’t suitable for long term borrowing because they have high APR – in the region of 35.9%.

However, they can help you improve your credit rating so that you stand a better chance of qualifying for more competitive deals in the future.

If you do decide that this is the card for you, only spend what you can afford each month and use it wisely.

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