04 Dec Choosing the Right Credit Card for You
Different credit cards each offer individual advantages and disadvantages, meaning you should think carefully about which one would suit your spending habits and credit situation. This can be difficult, but these questions should help you towards picking the card that’s right for you.
Can you Pay Back What You Spend Each Month?
If you can pay your credit card company back the money you have spent each month, you can take advantage of the interest free period and worry much less about the rate of interest on whichever card you choose.
This means you can look at cards which might have higher interest rates but also come with rewards or cashback. Cashback means you get back a percentage of what you’ve spent, usually in an annual payment. Rewards other than cashback can range from air miles to shopping vouchers or specific merchandise.
Do You Already Have Debts?
If you are already in debt, some credit cards could help you get out of that situation. Several credit cards have 0% offers, meaning you pay no interest for several months, which could temporarily reduce pressure and make it easier to pay your debts.
In the case of credit card debt, then a balance transfer can be used to transfer the debt from one card to another. If your new card has a lower interest rate than your old one it can make your debt much easier to clear. Find out more about clearing credit card debt here.
Credit cards can also be used to pay off overdrafts or loans. Money transfer cards allow you to put money from the card directly into your bank account, meaning you have much more flexibility to use the money than with other types of credit card. This can allow you to pay off debts such as loans or overdrafts or to make major purchases that you could otherwise not use a credit card for.
Do You Have a Poor Credit Score?
Whether a card provider will accept your application depends on the information in your credit report, including what you currently owe and if you have made or missed repayments, and your personal information, such as age and income.
If you have a bad credit report some credit card providers may reject you, but there are cards designed for people in your situation. These cards often have a higher rate of interest and a lower credit limit, which is the amount you can owe on any one card at a time. Applying and being rejected for credit cards shows up negatively on your credit report so try to be realistic and apply to providers who are more likely to accept you.
Using these cards can eventually improve your credit score and can make it possible for you to be accepted for cards with lower rates or rewards. You can do this by staying within your credit limit and paying your balance in full and on time. Avoid making cash withdrawals as these often have high interest rates attached and can damage your credit report.
Some cards may even improve their own rates over time if you are a reliable customer.
Do You Travel Overseas Often?
While all credit cards can be used abroad, there are several extra fees which can hit you hard if you don’t pick the right card.
Transaction fees are the fees charge by your provider for spending in a foreign currency, while withdrawal fees are what you are charged when you withdraw cash abroad. You will also be charged interest as soon as you withdraw your cash, so these fees mount up.
There are credit cards designed to be used abroad, with no transaction fees, no withdrawal fees and a lower than usual rate of interest on withdrawals. If you are someone who spends a lot of time abroad, it might be that getting one of these cards would be the right choice for you.
When taking your credit card abroad you should also always remember to let your provider know in advance, otherwise it can look suspicious and your card may be stopped.
Do You Run Your Own Business?
Business credit cards can make the running of a business much smoother and help you to control your cash flow while also keeping your business and personal finances separate.
A business credit card has several benefits, from the fact employees can use business credit cards to pay work expenses to being able to pay for supplies before money comes in, for example while waiting for a customer to pay a bill.
Business cards differ from ordinary cards in that, rather than being assessed on your own details, the card provider will accept or deny your application based on the company’s assets and credit history. If you are a sole trader, they may also consider your finances. Some providers do only provide cards for businesses with a certain level of income.
Are You a Student?
Many credit card providers offer cards specifically catering to students. These cards treat your student loan in the same way as other cards would treat a regular wage. They do, however, have a higher interest rate than most other credit cards.
While these cards are designed specifically for students, it can be financially dangerous to have one of these cards, as debts are liable to build up if you do not manage the card carefully.
On the other hand, it can be useful to have a credit card as a student, as it can help you to build up your credit report. Often you can keep the same card after graduation, with a lower rate of interest and a higher credit limit if you have been a reliable customer.