How to choose a credit card that suits you

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Choosing the right type of credit card could save you money in interest, earn you rewards or help you get accepted for borrowing in the future. Here is how to pick the right credit card for your needs and where to find it.

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What do you need a credit card for?

When choosing a new credit card, it's important to first know the purpose you intend to use it for. Is it to pay down debt, improve your credit rating, fund a large purchase, or earn rewards? The purpose of your credit card will determine which type of card to apply for.

If you want to pay down debt

0% balance transfer cards are useful if you want to pay down existing debt, without paying any interest. Many of these credit cards come with lengthy interest free periods. You can transfer the balance from one or several credit cards onto your balance transfer credit card, often for a small fee. Then you can pay off the balance in monthly instalments. The interest free period on some cards can last up to 29 months.

Alternatively if you have an overdraft or loan, you might consider a 0% money transfer card. These cards work just like balance transfer cards, except that they allow you to move money from your new card directly to your bank account. You can use the money you transfer to pay off your overdraft or loan.

Keep in mind that the length of any interest free period you are offered will vary from provider to provider, and will depend on your financial circumstances and credit history. Lenders will be far more likely to offer lengthy interest free periods to customers who have a reliable history of borrowing money.

If you want to improve your credit history

Credit building cards are aimed at individuals with no previous experience of borrowing or those with poor credit histories. These cards usually come with high interest rates and low credit limits. But if you use them responsibly and pay off the balance at the end of each month, it will help you improve your credit rating, build a relationship with the lender and improve your chances of being approved for better credit products in the future.

If you want to make a large purchase

If you want to make a large purchase such as furniture for your home or the latest mobile phone, but don't want to spend a large amount of money in one go, you should consider a 0% purchase card. These cards offer lengthy introductory interest free periods. This means that you can charge your purchase to your credit card and then pay off the balance in monthly payments. As long as you pay off the full balance before the end of the interest free period, you won't pay any interest on your purchase.

If you want to earn rewards

Several credit cards these days offer different benefits and rewards to incentivise you to take out a credit card with them. The rewards can vary from card to card, but some of the most common rewards offered can include:

  • A rewards card can get you vouchers or in-store point, such as Tesco club card points or Sainsbury Nectar points, for your favourite shops as you use the card

  • An air miles card can get you airmiles, such as British Airways Avios, that you can put towards flights as well as access to airport lounges

  • A cashback card can give you cash every time you spend on the card.

An important thing to keep in mind about rewards cards is that in order to offer these benefits, many of these cards often charge annual fees and have much higher interest rates.

Getting a rewards card only makes sense if you typically pay off your balance in full every month, and if you're gaining enough from the rewards in order to justify the cost. Also, missing just a single payment can mean losing all the benefits.

If you want to use your card abroad

You can spend on most credit cards outside the UK, but it can be expensive. Here are all the charges you pay when you use a credit card abroad.

However, there are specifically designed credit cards aimed at regular travellers. If you travel frequently, you could find one with a low interest rate and no fees for transactions or cash withdrawals.

Compare credit cards you can use abroad

If you have bad credit

If you have a history of missed payments or have a low credit score, it can be difficult to be accepted for a standard credit card. Credit building cards are designed especially for those who’ve had trouble getting credit due to a low credit score. 

Credit building credit cards typically have higher interest rates and lower credit limits, but they are easier to be approved for because providers consider more than just your credit history when you apply. 

If you run your own business

You can get a credit card in the name of your business if you are a sole trader or look after the finances of a company of any size.

A business credit card can help you to manage your personal and business finances by keeping your personal money separate from your business' spending.

Card providers will sometimes offer extra cards so several employees can make purchases, and itemised statements to track their spending.

When you compare credit cards there are a few things you should consider

Once you have identified the purpose of the credit card, there are a number of features you should consider when looking for a specific credit card deal. These include:

  • Fees: These are the costs of owning a credit card. These could come in the form of an annual fee - which can range from £0 to hundreds of pounds depending on the credit card type - or other fees such as late payment fees, or over limit fees.

  • Interest rates: Interest is the price you pay for borrowing with a credit card. Credit cards are unsecured products, which is why they tend to have higher interest rates than other forms of borrowing.

  • Interest free period: Many credit cards offer interest free periods where you are not charged interest on your spending, as long as you pay the minimum balance by the due date of every billing cycle. The interest free period can range from a month to over two years depending on the lender.

Rewards: Many cards offer rewards in the form of cash back, air miles or loyalty points, which you can earn based on your spending.

Find the best credit card for you, whether you're looking for 0% card for balance transfers or purchases or day to day spending and rewards

About Salman Haqqi

Salman is our personal finance editor with over 10 years’ experience as a journalist. He has previously written for Finder and regularly provides his expert view on financial and consumer spending issues for local and national press.

View Salman Haqqi's full biography here or visit the press centre for our latest news.