Finding the right credit card for you

Of course, the vast majority of people have at least one credit card and many have more than one. They are convenient, safe to use and, for some transactions, essential (try renting a hire car without a credit card, for example). But how many card-holders have given serious thought to the particular card or cards that they use. What are the principal considerations in finding the right credit card for you?

As is so often the case, it all depends. It all depends on your particular circumstances and the way in which you intend to use the card. But even in these days of post-credit crunch, the competition amongst card providers is sufficiently intense that, whatever you lifestyle and whatever your spending habits there is almost certain to be a choice between some credit cards that will suit you better than others.

For example, if you use your card often, but rarely manage to clear the outstanding balance each month the most critical consideration is likely to be the interest rate charged on that remaining balance. Different cards apply different rates, of course, but these are most conveniently expressed as the annual percentage rate (or simply APR) for ease of comparison. It is also worth bearing in mind that different rates of interest are also likely to apply to purchases, cash withdrawals and use of the card overseas.

If the outstanding balance on a credit card is one that has accumulated as a result of past spending, there is still a large choice of cards offering zero percent interest on balance transfers for up to a year. By transferring an outstanding balance to a new card with such an introductory offer, therefore, it is possible to prevent further interest accumulating while the debt is repaid. Although some such transfer deals also extend the zero percent interest to new purchases made using the card, beware that not all of them do and that in such cases your monthly repayments will go first to paying off the transferred balance, leaving the new purchases to attract the maximum rate of interest. Clearly, it will also be important to diary the date when the introductory deal is going to expire and when any existing balance and new purchases both revert to the provider’s standard rate of interest. This will mark the time when you should aim to have cleared outstanding balances or are prepared to start the process of finding the right credit card for you all over again with a further balance transfer at zero percent interest.

Of course, if you are sufficiently disciplined to repay the whole of any outstanding credit balance every month, then you will pay no interest however much your card is used for purchases (although cash withdrawals will start to attract interest from the moment the withdrawal is made). In such a case, you are less likely to be concerned about the rate of interest charged by the provider and more interested in whether a monthly subscription or administration fee is levied for holding the card. If interest rates are less to worry about, you might instead consider the benefits of any “reward” or “cash back” offers made by certain card providers.

Finally, whatever kind of credit card user you are likely to be, the opportunities for your finding the right credit card for you will also be determined by the kind of credit card user you have been in the past. These days, past credit history will be scrutinised more closely than ever and the availability of some cards, some transfer offers, and the most attractive interest rates, is likely to be restricted to those with the healthiest credit rating.