We make comparing credit cards super simple
Plastic can be fantastic when you've got the right credit card in your financial arsenal. Used wisely and responsibly, they can be a real boon for budgeting.
But how do you know which credit card to choose? With everything from balance transfer cards to cashback cards on the table - it can be a bit of a head-scratcher.
Here's the skinny on choosing a credit card...
Purchase credit cards
- Useful for spreading the cost of your shopping, for instance if you're making a one-off expensive purchase
- Certain purchase cards can offer interest-free introductory periods
- Balance will need to be paid off before the introductory period ends to avoid getting charged interest
Reward credit cards
- Depending on the type of card you choose, you can earn points as you spend/join a loyalty scheme/get money off flights
- Watch out for short introductory periods and high interest rates.
- You'll need to pay off the balance in full each month to really reap the rewards
Cashback credit cards
- Allow you to earn a percentage of your spending back as an annual bonus
- Some may pay as much as 5% cashback
- Tend to have a higher interest rate and shorter introductory periods, so the balance will need to be paid off in full each month to make it worth it
Credit cards for debt
If you're in the red, don't be dismayed! There are options which could help you with managing debt and eventually be free of it. Remember that borrowing on a credit card is still debt though, so take steps to pay it off as soon as you can.
Let's take a look at the potential choices...
Balance transfer cards
- Allow you to transfer existing debt to the card, there'll usually be a fee for doing so though
- 0% balance transfer introductory periods can be as lengthy as 30 months. Holy moly!
- Balance must be paid before introductory period ends to avoid paying interest
Credit builder cards
- Useful for those with a poor credit score or little credit history looking to borrow
- Usually have a high rate of interest to represent the risk they pose to the lender
- Offer a limited amount of credit which can be extended if you demonstrate you can repay the balance off each month
- Top up your prepaid card with money to stay in credit
- You can use the card until the balance hits zero
- No credit check is required for a prepaid card
Credit card applications and credit ratings
A rejected credit card application can have a negative impact on your credit rating, which in turn can make it harder for you to be accepted for borrowing products, such as credit cards, loans and even mobile phone contracts in the future.
It's important to make sure that you check your credit rating regularly, so you can weed out any erroneous details, like a wrong address, or anomalies and correct them sharpish.
Having a rejected credit card application can unfortunately leave its mark on your credit rating.
Did you know..?
- In March 2017, the total credit card debt was £68.08bn, this works out at an average of £2,521 per household
However, smart search is here to the rescue, displaying how likely you are to be accepted for a credit card before you apply, without leaving a mark on your credit rating. Pretty nifty.
What to consider when choosing a credit card
There's a lot of choice when it comes to credit cards, so picking the right one takes a bit of consideration. First of all you need to decide what you need the card for.
Next, before plumping for the plastic, you should take into account the fees, interest rates, the representative APR, application criteria and the length of the introductory period, if there's one. If you want to use your credit card abroad, you'll want to choose a card that won't charge you.
Credit card protection
Cheers to section 75 of the 1974 Consumer Credit Act, which may protect items purchased with a value between £100 and £30,000. So if you buy an item or service that turns out to be faulty, you could get your money back either from the retailer or the credit card company.
Read all about it...
Still getting to grips with credit cards? We have a plethora of guides on everything from charity cards to protection insurance, as well as store cards, low APR cards, air miles and lifetime balance transfers.