Choosing a Credit Card
Many consumers still do not like credit cards and point blank refuse to hold one. However, if used efficiently and sensibly, credit cards can be made to work for you. They also offer added layers of protection not available with debit cards.
More from Choosing a Credit Card
6 January 2009
Choosing A Credit Card
What needs to be decided is what your needs are.
So what exactly should you look for when choosing to apply for a credit card?
There unfortunately is no one card that will suit all of your needs. What needs to be decided is what your needs are. For example:
Will you pay the card off in full
Do you require a 0% balance transfer?
Do you require a low rate balance of life transfer?
Will you be using your card overseas?
The list could go on and on. But by starting with basic questions you will be able to immediately narrow down your search. Remember, too many credit card applications in a short space of time can lead to a refusal of cards due to too many credit checks being performed.
How reliant will you be on the card?
Another important question to ask yourself is to look at your spending habits. How often will you be using the card? Will you use the card rarely, at least once a month or daily?
Those of you that will use your cards for just about everything instead of using cash or cheques should consider looking for credit card protection. There is often a charge for this but if you lose your card or it is stolen, you will not be held responsible for any purchases made.
If you are using your card for almost all purchases then a cashback card can be a good option. The best deals refund up to 5 per cent of the cost of your shopping - make your card work for you.
Alternatively, if you have a favourite supermarket or would like to earn free flights etc, you could opt for a loyalty card. These work in a similar way to cashback cards but offer rewards such as discount vouchers which can then be used towards days out.
Do you travel? Then why not consider a card with frequent air miles as a reward. Or perhaps one that offers travel insurance or is free from currency exchange fees.
How safe are credit cards?
Credit cards offer much more protection for consumers than debit cards. For example:
Legal Rights. If you buy something and the company goes bust, or the goods are damaged or broken then you can go straight to the credit card provider. This protection only applies to credit and not debit cards.
Purchase Protection. Some cards offer an additional 'purchase protection'. This covers you if the goods are lost, stolen or accidentally damaged. There is often a charge.
Travel Accident Insurance. Many cards also have free travel accident insurance with £50,000 to £250,000 worth of cover. While this isn't the same as full travel insurance, some platinum or gold cards do offer that as well.
ID Fraud Protection. Some credit cards have started offering ID fraud protection as part of their benefits. This means you'll get access to their help lines if you have a problem.
Cash advance fees and interest rates
Beware of withdrawing any money from the 'hole in the wall' with your credit card. This should be considered only in emergencies as the cost of interest is likely to be extortionate. Ask about the fees and interest rates when choosing a new credit card.
You should also find out about what outstanding debts are cleared first. Most card providers use your repayments to clear the cheapest debt first and the most expensive debt last, meaning any cash withdrawals can remain on your balance for months.
Base your choice of card around your lifestyle... not the other way around
What matters most is to find the best card that fits your spending habits. Don't get sucked in by the offers… make the card work for you!