Find the right credit card for you
There are hundreds of credit cards on the market, each one falling into one or several categories depending on its intended type of use. So - when you compare credit cards - how do you choose the right one to suit your type of spending?
Think of credit cards as your friends, each with their own unique personality, strong points and shortcomings. Some you’d take to the pub, others you’d take on an expensive holiday. As the saying goes: choose your friends carefully. Confused.com shows you how.
Standard credit cards
These are your regular credit cards – flexible friends to get you out of a tight situation. With variable APRs, they’re accepted at millions of locations worldwide. Make sure you compare rates at Confused.com and shop around to get the great deal.
Gold and platinum cards
Known as ‘status cards’, they typically have higher credit limits and are good to pull out if you’re trying to impress.
While they used to boast lower APR, these days it’s more about the extras – travel insurance, cover for lost luggage or delayed flights, hotel discounts, personal liability cover and medical insurance are just some examples.
You generally need to be a high earner or have a decent credit history to qualify for certain ‘status cards’, although it’s possibly to be offered a Gold Card if you’re earning just £15,000. Some providers charge for the privilege of owning a Gold or Platinum card. For more information, have a read of Standard, gold, or platinum - What's the point?
Balance transfer credit cards
A balance transfer credit card allows you to switch your debt from a high-interest card to a low or zero interest card in order to benefit from reduced monthly repayments.
You’ll benefit from a low or zero % APR for anywhere between six months and five years. Although you’ll save money through reduced payments, issuers usually make you pay a balance transfer charge of between 1% and 3%, so make sure your savings outweigh any fees.
If you make any new purchases on your credit card, these are likely to accumulate at a standard interest rate until you’ve paid off your low-interest balance transfer in full. This can take some time, so it’s often worth using a separate credit card that’s specifically designed for making new purchases.
Loyalty credit cards
A friendship that goes both ways - these are similar to store cards except you can use them elsewhere too. Use your card at the store, and you’ll be rewarded with discounts or vouchers. Asda, M&S, John Lewis and Tesco all offer their own credit cards. However, the value of these rewards is often derisory due to their high interest rates.
Loyalty cards from British Airways, BMI or Lufthansa are much better value. They also offer you airmiles every time you use your card.
There are more and more football loyalty cards coming on the market too. These give you discounts at the club shop and pay money to your team every time you use your card.
Cashback credit cards
Cashback credit cards do exactly what they say – give you money back. While the amount varies, you can often qualify for 5% cash back on purchases for the first three months. This reverts to between 0.5% and 1.5% on subsequent purchases.
However, just like the friend who lends you money but expects it back with interest, if you’re not in the habit of paying your credit card bill in full every month, the benefits of cash back can be quickly outweighed by the interest rates you’re paying. If you’re a timely payer, however, these can be excellent value.
Have a look at how Cashback credit cards reward their users.
Low-interest credit cards
These can be tempting, but once the honeymoon period is over, there’s a price to pay. Low-interest credit cards offer a seductive introductory rate of 0% on purchases for anywhere between three months and one year. After that, expect to pay around 15 or 16%.
Take advantage of low-interest cards to secure cheap credit on expensive purchases such as a luxury hotel. But beware - canny operators are known to take advantage of 0% deals for ‘stoozing’ – cheaply borrowing money on your credit card and investing it in a high interest account, yielding a quick profit.
Charity donation cards
American Express made a lot of noise about their RED Credit Card, which donates money to the fight against AIDS in Africa. However there are many other charity cards out there doing the same, whether it’s Help the Aged or Cancer Research.
But perhaps you’re best to follow in the footsteps of your friend with a social conscience and go directly to the organisation in need. The amount these credit cards actually pay to charities is often small.
Read expert tips from Confused.com on Finding the Right Plastic For You.
Note: example rates correct at time of writing.