A credit cards allow you to spread the cost of your spending. When you use a credit card to make a purchase, you borrow money from the credit card provider on a flexible contract. That means that you can pay back any amount over the minimum payment each month without penalty.
What are the different types of credit cards?
There are lots of different types of cards to choose from in our comparison table. But which type is right for you? That depends on how you intend to use ur credit card.
To make purchases
A 0% Purchase credit card is one that gives you an interest-free period for a set amount of time when you first take it out. That means you won’t be charged interest on your spending for that period. The period can range from a month up to 29 months, depending on the provider and what offers you can find.
To consolidate your debt
A 0% balance transfer credit card lets you move your debt from an older card, or even several cards, to a new one.
It’s a useful way to avoid paying interest on your debt as the long interest free period offered on most balance transfers could save you plenty of money if you expect it will take you some time to repay the amount owing. But you should be aware that some providers often charge a fee to transfer your balance, so finding the best deals is vital.
To get cash in your bank account
Money transfer cards are a way of moving cash from a credit card to your current or savings account. 0% money transfer cards are ideal for clearing an overdraft. They’re also a good way to get a cash loan on which you don’t pay interest for a set period.
To earn rewards on your spending
When you’re looking for the top credit cards you could benefit from, you might like to think about a cashback credit card. These let you earn money back on your spending.
Or, you could look at reward credit cards. With these you earn points when you spend, and these can be used for things like air miles, shopping vouchers or hotel vouchers.
To build your credit score
If you’ve got bad credit, or no credit history at all, you’re more likely to get accepted for a credit-building credit card than any other type of card. You’ll find that rates are often a bit higher with these, and you’ll usually get a lower credit limit. But, if you’re careful with how you use your credit-building credit card and make repayments on time, you’ll improve your credit score.
How to find the best credit cards, UK wide
When you’re looking for the best credit cards, it can be tempting to look for the cheapest deal. But it’s better to think about how you intend to use it, because each type comes with different benefits depending on how you use it.
However, it's important to consider some key features before getting a credit card:
APR: This the cost of borrowing on your credit card. You'll be charged this rate on your balance if you don't pay off your balance in full every month. When comparing credit cards, you want to find one with the lowest APR possible.
Annual free: Some credit credits charge a yearly fee, which is added to your balance. Many premium and rewards cards charge monthly fees.
Charges: On top of the APR, some credit cards also charge you for things like late payments, going over the credit limit, or using your credit card abroad.
Introductory offers: Many credit cards offer with introductory offers which where you start out pay a low interest, or no interest for given period of time. It can range form three months and go all the way up to 29 months with some credit cards.
Rewards: Some credit cards offer rewards on your spending by awarding a set number of points for every £1 you spend. These points can then be cashed in for discounts in retail stores, hotels, air miles, or cashback.
To help you find the best credit cards for your needs which have the lowest rates, look at the comparison table above. Our free eligibility checker helps you find out which credit card offers you’re eligible for, and it won’t affect your credit score. It’s a risk-free way of finding the best credit card deal for you.
How much can you borrow with a credit card?
Typically, credit cards are meant for borrowing relatively small amounts of money, usually ranging from £1,000 to £5,000. Although credit limits can be lower for those with bad credit, or much higher for those on high incomes.
The amount of credit you are given will usually be based on your financial history and current financial position. If you’re looking to borrow more than £5,000 or for a longer period, it’s generally cheaper to get a personal loan as the interest rate is usually much lower.
What are the pros and cons of a credit card?
There are lots of reasons why you might want to get a credit card, aside from the obvious one which is that they let you spend more money than you have.
A credit card allows you to make a large purchase and pay it iff instalments that you can afford.
Having a credit card is one of the best ways to increase your credit score. It can help if you don’t have much of a credit history at all or if you want to improve a poor credit score. As long as you use your credit card responsibly (paying it off on time and not missing payments), your good behaviour will be recorded on your credit file.
Section 75 of the Consumer Credit Act protects you from fraudulent charges when you use your credit for purchases of over £100 and up to £30,000.
If you use your credit card responsibly, you’ll be able to rack up air miles, cash back or loyalty points to spend with retailers or hotel groups. This could reduce your travel expenses in the long run.
Some of the best credit cards come with extra benefits, like travel insurance or airport lounge access. Although they don’t sound like much, they can add up to a big saving over time.
If you don’t borrow responsibly and miss repayments, you could end up with serious debt.
For many, having access to credit tempts them into spending more than they can afford leading to a cycle of debt, where they are continuously trying to pay off the debt they'e racked up.
What you should consider when you compare credit cards?
There’s lots to take into account when you compare cards. This includes:
Fees: These are the costs of having the credit card. They’re important to look at if you’re trying to find the cheapest deal. There might be an annual fee (which could cost hundreds of pounds), late payment fees, or over limit fees. So read the small print!
Interest rates: This dictates how much interest you pay for borrowing. Credit cards aren’t secured against any property. So, even with the best offers, interest rates are usually higher than with other forms of borrowing.
Interest-free period: Many of the best credit cards have an interest-free period at the beginning. During that time you’re not charged interest on your spending. As long as you pay the minimum balance on time every month, you won’t pay interest. The interest-free period can be from a month to around two years, depending on what deals you can find.
Rewards: Some of the top credit cards offer extra rewards. This could be cash back, air miles, or loyalty points. The more you spend on your card, the more you get.
The best credit cards have low interest rates, long interest-free periods and low fees. Though, that's not always the case. Many premium credit cards charge high annual fees and high APRs, but offer rewards and services that make it worth it.
This is why it’s important that you don’t just look for the lowest rate without thinking about anything else. Finding the best card for you means looking at why you’re borrowing money, how you plan to use it and what you can afford.
Tips on how to mange your credit card
Credit cards are useful tool when used responsibly and strategically. Here are some things to keep in mind when using one.
Don't miss monthly payments: Missing payments is one of the worst offences when using a credit card. You're often charged a penalty, and it hurts your credit score.
Avoid withdrawing cash: Withdrawing money from your credit card often comes with hefty fees. You'll also be charged interest on top of that.
Payoff your balance in full: Unless you've got interest free credit card, it's usually best to pay off your balance in full every month. It saves you from being charged interest, and you don't accumulate debt.
Avoid too many applications: Applying for credit too often can hurt your credit score. That's because each time you apply, it leaves a mark on your credit file. It'll make lenders think you're desperate for credit and thus they'll be less likely accept you.
Be careful when overseas: Many credit cards charge foreign transaction fees when you use them abroad. Make sure you have a card that doesn't charge you these fees when you travel.
Be smart about rewards cards: Pick rewards that you actually use regularly and that they outweigh the annual fees that rewards cards usually charge.