If you are looking to get a credit card for the first time or to replace one that you have, then you will find that there are a lot of different cards to choose from. It can be rather confusing to try to work out which of the cards will be the best. There are some differences to look out for, that should help you to make your decision more easily.
The main selling point of any credit card will be the interest rate. This is the percentage that you will pay if you owe any money on the card. Basically, if you are planning on owing money, then you need this to be the lowest possible amount. It is worth noting though, that you do not have to owe money when you have a credit card. The cards are designed so that you have the option of repaying everything that you have spent on it at the end of the month. Quite a lot of people choose to do this. It means that you do delay repaying the money and you can set the repayment date to just after you get paid and it can be a way to help you with budgeting. You can even set it up to repay the full balance each month automatically. However, more than half of people that take out credit cards do not repay everything they owe and so interest rate is important to them. The rates tend to be high compared to other forms of borrowing and so if you are choosing a credit card because you want to borrow money, it could be worth comparing it to other options available to you. Often it is just a convenient way to pay for things and it also offers some insurance when buying online as well as security and so can be a useful thing to have.
There are some credit cards that offer cash back. This means that when you use the card you will get some money back. This will normally be credited onto the card the following month for you to spend. Sometimes cards might offer rewards, such as air miles instead. Although these types of cards can seem very attractive, it is important to note they will often have higher interest rates. This is because the interest will pay for the rewards. Therefore, you need to be very careful in deciding whether these cards are the right type for you. If you can find one with a competitive interest rate then this will be well worth taking. However, if you cannot then you need to think about whether you are likely to be repaying the full balance of the card each month or whether you will be leaving some of the balance unpaid. If you are repaying it in full each month, then it will be worth getting the cashback card and benefitting from those payments. However, if you change the way that you use the card, and start leaving some of the balance unpaid, you need to make sure that you check the interest rate and see whether you will be better off switching to a different card. It might seem complex to do the maths, but actually, the cashback is normally so low that if you do not pay the full balance it is worth assuming that it is better to switch to a card with a lower interest rate.
It is important to make sure that the card that you use will be accepted in the places that you plan to use it. This may sound odd, but there are some brands of credit card that are not widely accepted, particularly abroad. Depending on where you want to use it, make sure that you carefully check and are sure that it will be the right card for you because you can use it where you wish to. The bigger brands are more likely to be widely acceptable, but just check the places that you shop and make sure they will accept your card before you sign up to use it.
As well as the interest, credit cards will have extra charges and fees which you will pay under certain circumstances. It is good to be aware of what those are and when you might need to pay them so that you will be able to see whether some cards are better than others for this. There are different things that you might have to pay for and below are some examples –
- Using the card abroad
- Not repaying the minimum monthly amount
- Yearly fee
- Withdrawing cash
There are other things you may have to pay for as well, so make sure that you carefully look at the terms and conditions or talk to customer services so that you are sure are all of the fees. You may find that these are not relevant to you as you may not intend on not missing the minimum repayment or withdrawing cash, but a yearly fee will apply to everyone as might some other charges, so it is a good idea to make sure you are aware of them all so that you can be sure that you not be paying any unexpected fees. Of course, you will find that some fees, like withdrawing cash, will apply to all credit cards, so it could be a case of just comparing them to see which is the cheapest or making sure that you use a debit card to withdraw cash instead. Just being aware is important though, so that you do not get any unexpected charges.