With hundreds of credit cards on the market, it’s easy to get confused. But fear not! We show you how to work out which card is best for you.
Balance transfer credit cards
Balance transfer cards do what they say on the tin: you transfer your current balance to a new card. This can be a good choice for those already paying off debt on an expensive, high-interest credit card.
By switching to a 0% balance transfer card, you may save money on repayments. This is because there’ll be no interest to pay on the debt for the period of the deal.
Some cards even allow you to transfer money from the card into your current account. This way you could pay off an overdraft with your plastic, for example. It may also be useful for a larger cash purchase, such as a secondhand car.
At the end of any agreed 0% period, the card will revert to the provider’s specified interest rate, for instance 18.9% APR.
But it's worth remembering that if you pay your balance each month, then you won't get stung with these interest payments. And the balance transfer period gives you a sporting chance of getting your balance back down to zero.
Most providers charge you a balance transfer fee of around 3%, eg £30 to transfer a debt of £1000. So it’s best to factor this cost into your potential savings.
New purchase credit cards
Credit cards for purchases appeal to people who want to use their card in shops, restaurants or online, for example.
They come with 0% interest on purchases for a number of months (at the time of writing, between 21 and 27 months is typical), meaning you can spend on your card without accruing interest. This is particularly beneficial if you need to make a large purchase and want a period of interest-free credit.
Again, at the end of the agreed period you revert to the provider's standard rate.
Low standard rate credit cards
Long-term, low-rate cards are ideal for borrowers who:
are looking for an alternative to a loan
want to use one credit card for all their needs
don’t want to regularly switch cards.
They’re relatively straightforward as you’re simply charged one low rate of interest. There are no deals, no initial periods, no rate to revert to after a period of time.
They’re particularly useful for those who want to transfer a large balance and pay it off over a longer term.
Cashback and rewards credit cards
These credit cards offer you cashback or reward points each time you spend. Cashback is credited back onto your card, and points can be spent on a wide range of products and services.
Cashback and rewards credit cards are favoured by borrowers who spend on their card regularly and then repay their balance in full each and every month.
If you only tend to repay a smaller amount of the debt each month you could be better suited to a credit card with a low standard interest rate.