Choosing the Right Credit Card

With so many credit cards to choose from its crucial you think about how you intend to use the card. The questions below should help you figure out what type of credit card is best for your situation, but finding the best card is a fairly complicated process. Use our savings calculator on the compare page to find the credit card that is right for you.

Frequently people ask us which is the best credit card. There is no simple answer as it depends on- how you intend to use it, and your current and future financial situation. It is also unlikely that any one card would be best for you in all scenarios, so you should consider getting more than one credit card. According to APACS (a UK payments association), in 2007 average number of cards per person was 2.4.

Per APACS, there are over 1500 different credit cards available in the UK market, so before deciding on which of these cards is best for you, you should answer the following questions as it will help you narrow down the list.

How will you use the credit card?

  • Do you have a large unpaid balance on your current credit cards?
    If you do then, depending on the size of your balance, a balance transfer credit card maybe the best option for you. You will have to look at the promotional rate on balance transfers and duration of this promotion. For example if you expect to payoff the balance in a year you should look for balance transfer cards with low interest on balance transfers up to 12 or 15months. If you have good credit rating several credit cards with 0% balance transfer rates for 6 months to a year are available. Make sure to look at the balance transfer fees the average is around 2.5%-3%. There are some cards that waive this balance transfer fee for a promotional period.

  • Do you currently pay for your purchases with cash/ don't use a credit card/ pay off your credit card balance in full each month?
    If you do then, a cashback credit card/ rewards credit card maybe the best option for you.
    Most cashback credit cards typically provide between 0.5% to 1.5% cashback. This is usually based on tiered level of spending on the card, i.e. the more you spend greater the percentage of cashback. Some cards also have a higher promotional rate for first 3-6 months. So if you are planning on making some big purchases, it might be ideal time to get a cashback credit card. It is important to make sure you pay off the monthly balance in full and in time. Consider setting up a direct debit from your bank accounts to avoid late fees/ interest charges.
    If you travel frequently/ shop frequently at certain retail stores you should consider reward credit cards from the travel providers/ retailers. Most have different point schemes (1 point/mile per £1 to 10 points per £1 spend. The value of these points differs so it is harder to do apples to apples comparison. Use our compare page to find the best provider for you. Ideally you want to choose the card that provides a benefit value of 1% or higher of the spend (i.e. £1 in rewards per £100 in spend); otherwise a cashback card is a better option.

  • Do you anticipate making big purchases in the next couple of months and repaying the balance over the next 6 to 12 months?
    If you do then, a purchase credit card maybe the best option for you. Most purchase credit cards have 0% rate on new purchases for 6-9 months and then the interest rate increases. Depending on how soon you expect to pay off the purchases you should get a card that gives you the longest duration for the 0% rate or the one with the lowest APR after the introductory period. With these cards you should be proactive and change the cards if you are unable to pay off the balances before end of the introductory interest rates.

  • Are you not sure about how much you would charge on the credit card and need flexibility in repaying the balance or don't want to worry about changing cards frequently?
    If you answered yes then a Low APR credit card maybe the best option for you. Typically these cards offer a low rate - 6% to 10%(not an introductory 0% rate) for the long term. Most of these rates are still variable i.e. not guaranteed to stay the same, but usually these rates don't change much, so it means you don't have to look for a new card when you run into financial difficulties or every 9 to 12 months.

Hopefully the above helps you figure out which type of credit card suits your situation the best. However with the different rates (introductory, balance transfer, typical Apr's), fees, incentives etc. finding the best card is a fairly complicated process. We have built calculators that will to help you identify the right card. Please visit our compare page and answer some questions about how you plan to use the credit card and get customized rankings.

The content and information on this website are intended as information only and shall not be construed as financial advice or recommendations of any nature in accordance with the Financial Services and Markets Act 2000 nor is it intended to address specific financial requirements.
Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.