How to choose the right credit card for you

30 December 2014 ( 06 July 2016 )

A guide to help you choose the right credit card to suit your needs.

There are hundreds of credit cards available in the UK and choosing the right one can often seem very complicated.

These are the factors you need to consider when selecting a credit card.

Informative, in-depth and in the know: get the latest money news with Saga Magazine. 

1. What do you need your credit card for?

The main reason for taking out a credit card used to be to help spread the cost of expensive items.

But these days there are many different types of credit card on offer.

Purchases card

This is the standard type of card, and may offer a low interest rate when you use it to for normal spending

Balance-transfer card

This allows you to move a debt from an existing credit card and benefit from a lower interest rate or zero interest for a number of months.

Rewards card

A rewards card could give you cashback when you spend up to a certain amount on it or when you buy certain items.

Holiday-spending card

Some credit cards charge lower fees when they are used abroad.

Money-transfer card

Certain cards let you transfer cash directly into your bank account, for example to help you clear your overdraft.

Credit-builder card

If you have a damaged credit history, you can help put matters right by taking out a credit builder card, using it, and making your repayments on time for a period of months.

Be careful where you store your personal information. Read about five scams to steal your identity.

2. When do you plan to repay what you borrow on your credit card?

If you use your credit card but pay back what you owe at the earliest opportunity – that is, when the next monthly statement comes through – you should not be charged any interest.

This might be the case if you want a rewards card or a card for holiday spending. If so, the interest rate applied to the card is irrelevant.

If you expect your debt to remain on the card for a while, you should choose the lowest possible interest rate.

Some cards offer zero interest for a fixed period, say 12 or 24 months, followed by a much higher rate.

If you are worried you might not be able to clear your debt within this period, you could consider a card with a permanently low interest rate as an alternative.

Read about the top five mistakes that damage your credit report.

3. What shape is your credit record in?

If your credit record shows any missed or late repayments – for example on a mortgage or mobile phone bill – then lenders are likely to turn you down for the cards with the lowest interest rates or the longest interest-free deals.

Credit reference agencies Callcredit, Equifax and Experian are obliged to give you a copy of your report for a £2 fee.

Find out how to check your credit report.

Try 12 issues of Saga Magazine for just £12

Subscribe today for just £12 for 12 issues...

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.