With more and more complex financial products coming onto the market, it can be overwhelming when trying to choose the right credit card. They can become extremely expensive, especially if you end up choosing one thatís not right for you.
Here are some top tips for choosing a credit card
Balance transfer Credit Cards
Balance transfer cards are good if youíre looking to combine several credit balances in one single card. They can also be useful if you want to take advantage of low interest rates. With the base rate remaining at an all time low of 0.5%, many leading banks and lenders are offering 0% interest balance transfer cards.
Recently the balance transfer credit card market has become much more competitive with lenders offering longer 0% interest periods. The lengthiest period to date is for 22 months from the Barclaycard Platinum with Balance Transfer card with the fee of 2.9% on balance transfers.
Halifax has also launched its longest ever balance transfer credit card deal with 22 months at 0% which is available to new credit card customers and a fee of 3.5%. There is however a limit of £3,000 with an APR of 18.9%.
However, if you want to transfer a large amount for a longer period than the initial deal, itís not advisable to switch every time the 0% transfer period is over as this could damage your credit rating in the long term.
Reward Credit Cards
These types of credit cards often offer incentives and rewards to encourage you to spend on the card. They come in all different shapes and sizes, many offering cash back schemes or points you can use for air travel and gift cards. They tend to have higher interest rates than other cards and some cards may have a limit on the rewards you can receive.
Sainsburyís recently launched their new Nectar credit card, with 0% interest on balance transfers for 15 months and on purchases for 6 months. If youíre a big Sainsburyís shopper, this could be the card for you. It features double Nectar points on all Sainsburyís shopping for two years.
The Capital One Bank World MasterCard allows you to earn 5% cashback on purchases for 3 months with a limit of £100, and then reduces the rate to 1.25% for unlimited cashback.
Purchase Credit Cards
Purchase credit cards typically offer 0% for an introductory period before an interest fee is applied after. This type of card is ideal for someone who makes regular purchases on their card, whether theyíre large or small. They offer better interest rates on purchases for shopping in the high street or online.
The period on purchase credit cards can vary and the longest 0% period for purchase cards comes from Tesco. The TESCO Clubcard credit card offers 15 month at 0% on purchases and rewards to customers. You must earn over £5,000 to apply and the APR is 16.9%. Marks and Spencerís offer the same length of 0% interest with reward points to shop there if you prefer it to Tesco. The M&S credit card has a lower APR at 15.9%.
Adverse / Credit Building cards
If you have bad credit and are looking for a financial product that will boost your score whilst borrowing money, a credit building card could be the one for you. The also allow people with no credit history to improve and build their credit profile. They tend to have high APR rates as well as purchase interest.
The Barclaycard Initial Credit Card has an 29.9 % APR (Representative Variable) 29.9 % purchases and balance transfers. Capital One Bankís Classic Visa Card is also a good start out for those who want to rebuild their credit history. The APR (Representative Variable) is 34.9% as is the balance transfers and purchases.