Looking for a credit card but confused about your options? We explain how to find the best credit card deals for your circumstances.
Credit card spending can be tricky to master, get it right and you are laughing all the way to the bank with instant access to cheap credit and the potential to earn a little back in the meantime.
However get it wrong and it’s easy to fall into the debt trap, leaving yourself faced with huge interest bills and unmanageable repayments.
Which side of the fence you fall largely depends on the type of credit card you use and, for this reason it’s essential that you focus on finding a card that works with the way you spend.
There's so much choice available with credit card offers ranging from interest free credit cards and balance transfer credit cards, cashback credit cards and rewards credit cards to 0% purchase credit cards so there's something for everyone.
Having said that, with so many different credit cards available finding your ideal spending partner is something that’s often easier said than done.
So, to make the whole process completely stress free we explain how to find the credit card that’s right for you.
The balance transfer credit card
If you have existing credit card debt and often pay interest on your borrowing your primary focus should be on making your outstanding balances as cheap as possible so that they’re easier to clear. Often the best way to do this is by getting one of the best balance transfer credit cards.
Credit cards balance transfer deals enable you to shift your existing credit card debt to a new card that charges a lower rate of interest than the one you are currently using. When it comes to doing this you have two main options:
0% balance transfer credit cards - A 0% balance transfer credit card typically offers a 0% period during which any balances you transfer will remain interest free and 100% of any payments you make will go towards clearing your debt.
When looking to save money on your existing debt by switching to a 0% balance transfer card you will also need to consider the ‘balance transfer fee’ that most providers charge. This tends to be a certain percentage of the total amount transferred and is something you will need to factor in when working out which card will save you the most money.
Introductory interest free offers can last anywhere from 6 months to almost 2 years. So when choosing between the best 0% credit card offers it’s usually best to work out how long you'll need to repay your borrowing and then go for the credit card deal that offers a long enough interest free period but charges the lowest handling fee.
However, you will need to remember that if you haven’t managed to clear your balance in the interest free time frame you will start to accumulate interest at the card’s standing rate, adding to the cost of your borrowing. For this reason you should try to clear the balance by the end of the 0% period or arrange to make another balance transfer.
Life of balance transfer cards - If you are carrying large balances on your credit cards and aren’t keen on switching provider every time a 0% offer expires then a lifetime balance transfer card may be right for you.
Although these cards charge interest it will be at a much lower rate than you would pay on a standard credit card, or low value personal loan meaning that more of your payments will go towards clearing your debts.
Generally, the lower the rate of interest available on these cards the better and, as most do not charge you a fee for balances transferred, it makes them an even better option.
For more information on using balance transfer credit cards and low APR credit cards to save money on your debt read our article Transfer your Balance and Save.
The purchase credit card
If you’re looking to make a large purchase and spread the payments out over a number of months, taking advantage of a 0% credit card on purchases offer can often be a cost effective option as many providers offer interest free credit card deals on new spending.
The best way to take advantage of these deals is, as you would a loan, make your purchase as soon as you receive your card (so that you can benefit from as many months of the 0% on purchases credit card deal as possible) and then set up a direct debit to pay an equal amount back to the provider each month so that by the time the 0% deal expires you have cleared your outstanding completely.
If you’re looking to use your credit card to make a big spend it’s important to go for the longest 0% purchase credit card deal possible so that you can avoid paying interest on your purchase. However, if you find yourself unable to clear it during this time you’ll need to look to taking advantage of the facilities offered by a balance transfer card.
The cash back credit card & reward credit card
If you always pay your credit card off in full each month instead of focusing on the APRs and introductory offers important to other credit card users you need to choose a credit card that is going to put money back in your pocket.
Cashback credit cards are the obvious option, crediting a certain percentage of your spend back each year you are effectively getting paid to shop. The best cash back credit cards pay a cashback rate of around 1% however, as a sign up incentive many also offer a higher percentage return for your first few months which can make spending on cashback credit card very worthwhile.
There are also a number of cards available that offer alternate rewards. Ranging from air miles and reward points to discounts on household bills and fuel these can also be a very profitable way to get a little back from your credit card company. So, when making your decision as to which to go for it really comes down to choosing the best reward credit card that offers the benefit you’ll get the most from.
For more information on making money from your credit cards read our guide Making Money from Credit Cards.
The ‘bad credit’ card
If you have a less than perfect credit history it can be difficult to get accepted for market leading credit card offers and continually applying and getting declined doesn’t do wonders for improving your score either. However, there is an option available to you that can give you some flexibility with your spending and help build your credit rating at the same time.
Offered by a number of providers bad credit cards can provide a realistic means of getting on the credit card ladder as lenders are often willing to accept applications from those who have been declined elsewhere. The downside is that credit cards for bad credit will often charge a very high rate of interest for the privilege .
For this reason the best way to use bad credit credit cards is to make a few purchases each month and then pay the balance off in full and on time so that you gradually begin to build a strong, reliable credit history without accumulating any interest on your spending.
For more information on building your credit rating with credit building credit cards read our guide How to Improve your Credit Rating.
