Designed to reduce the amount of interest you’re paying.
What Credit Card Is Best For Me? There are so many options when choosing a credit card. How do you know what credit card is best for me? Start by thinking about what and how you plan to use it, then shop around to get the one that suits your needs. Here is a checklist of all the things you should think about.
The key thing is whether you will be paying off the balance every month or spreading repayments.
Here is a brief guide to what each of the points on our choosing a credit card checklist means and also check out our apply for a credit card checklist.
Annual Percentage Rate (APR) is the cost of borrowing if you don’t pay the whole balance off.
If you pay less than the whole balance you will be charged interest on what’s still owed unless you have an interest free deal.
Interest rates are typically stated as a yearly rate this is called the annual percentage rate (APR).
APR will be detailed in your credit agreement. This will tell you how much interest will be charged, how and when it will be added to the account.
Avoid paying interest if you pay off the whole balance by the due date
How much do you plan to spend each month and will the rewards be worth it?
Accumulate points which can be used as discounts in supermarkets, flights or cashback to use where you want.
This is only worthwhile if you clear your balance every month. If you don’t the interest will soon outweigh the benefits of the rewards on offer.
If you don’t pay full balance you need to know what the minimum percentage.
If you can’t pay the whole balance you have to pay at least a minimum payment. When you only pay the minimum repayment each month it will increase the amount you have to pay overall. Be aware that by repaying the minimum payment it can work out less than the interest being added each month which means you may never pay it off.
Some cards charge a fee each year for use.
These fees can be charged annually or monthly which cover the benefits that come with the card.
What are costs for both cash withdrawal and payment charges.
Look for cards that come without fees for spending or withdrawing cash abroad..
Start off paying none or a low rate of interest and increases in a certain amount of time.
Check credit agreement what other charges apply.
Exceeding credit limit – If you go over your credit limit you will be charged a fee.
Late payment charges – You will need to make a minimum payment amount by the date specified or you will be charged a late payment fee. This can also affect your credit rating, increased interest rate or withdrawing any introductory 0% APR offers.
Dormancy fees – Inactivity fee if you go too long without using them.
Cash withdrawals – Withdrawal fee, Higher APR and Immediate interest.
It is important to work out what reasons you are looking to get a credit card and then look for cards that cover your criteria. The options are vast but so are the costs and APR so always include these important details in your choices. Credit cards generally have a high cost of borrowing and are easy to get yourself in debt but used wisely can help build your credit history. Remember every time you apply for a credit card it leaves a footprint and applying for too many can damage your credit.