Be a Winner at the Credit Card Game: Choosing the Right Card for Your Spending
Choosing a credit card used to be a fairly simple matter. You’d take a look at the few cards your own bank offered, as well as maybe one or two from specialist credit card companies, and apply for the one with lowest interest rate. These days, there are hundreds of different cards on the market, each differing slightly across the range of features, yet all proclaiming to be the best card you could hope for. How can you navigate the maze of marketing and hype to choose the card that’s right for you? It depends on how you plan to use it.
If you’re using a card purely as a convenient way to pay, and clearing your balance every month, then the annual precentage rate (APR) of the card doesn’t matter. It’s more important to have an interest-free “grace period,” wherein you can avoid interest on your purchases, provided you pay your balance in full each statement. You should look for a card with an interest-free period of between 50 and 60 days, or 30 days at the minimum. A card which also offers cashback or rewards benefits can be valuable, but avoiding interest should be your main aim.
If you’re planning to use your card to spread the costs of a large purchase over a few months, then a low interest rate is the key feature to look for, to ensure that you’ll pay as little for this facility as possible. Other benefits such as cashback may look tempting, but they have to be paid for somehow, usually in the form of an extra point or two on the APR. Choose a stripped-back card that offers a low rate and no extra features that push up the cost.
Funding One Large Purchase
If you have a single, significant purchase that you want to fund through credit, then a card with a long 0% introductory purchase rate can make an excellent choice. If you clear your debt before interest becomes payable, then you’ll effectively enjoy a free finance facility. Just don’t be tempted to go on spending with the card, as your focus should be on clearing the balance as quickly as possible.
Consolidating Other Card Debts
Although a low-cost loan is usually a better choice for debt consolidation than a credit card, a long-term 0% balance transfer offer can make sense if the figures work out. By combining balances from multiple cards onto one account, and paying no interest on the new debt for a period of nine months to a year, you can make valuable inroads into clearing the debt in the meantime. If you can realistically clear the debt within the 0% period, then this is a good choice; if not, a fixed low-rate card may be the better option. These cards will fix the APR on your transferred balances at a low level for as long as it takes to clear the debt, potentially saving you a lot of money of the rate is low enough.
It’s rare to find a card that offers best-buy deals across all categories from balance transfers to low APRs. However, some cards specifically market themselves as being better than average across the board, without leading in any one niche. These cards, which usually offer a single, low interest rate across all types of borrowing, can be excellent value if you use your card in a variety of ways. Just be sure the rate is low enough to compensate for the lack of extra benefits that more specialized cards may offer.
Credit cards are exceptionally convenient, but can be expensive forms of finance if you don’t choose wisely. Taking the time to evaluate the way you’ll use your card will mean you can enjoy the benefits of plastic, without paying too much for the privilege.