Comparing credit cards
Published Tue, May 21, 2013 Updated Tue, Feb 16, 2021
If you’ve decided that you’d like to take out a credit card it can be a minefield trying to find the best option for your financial situation. To help you decide, Money Saving Advice has put together some advice on choosing the right credit card.
Identify why you’re taking out a credit card
Before you even start comparing options, you need to establish exactly why you’re taking out a credit card and what usage you would like to get from it. For instance, if you’re looking to use it minimally in order to build up a better credit card rating, the type of deal that best suits you will be different to if you’re taking one out in order to fund a specific purchase.
The aim of the game with credit cards is to pay them off as quickly as possible – ideally you want to clear the balance in full each month. If you won’t be able to repay the full balance then you need to look for a card with 0% interest on purchases and make sure you clear the balance before this initial deal comes to an end, otherwise you could be stung by an increase in interest rates.
One useful place to start is a price comparison website, as this will allow you to view ‘like for like’ credit cards in order to establish which one offers the best deal.
Comparison websites tend to display credit cards in what’s known as a best buy table, which displays the cards available to you with the better deals at the top. You will usually be presented with some basic information on each card including the name of the provider, the initial interest rate offered, the length of this rate deal and the subsequent Annual Percentage Rate (APR) once the initial promotion comes to an end. You may also be given information on any interest rates charged on transferring balances from existing credit cards, any fees for taking out the card and cashback offers (if they are available).
Make sure you meet the eligibility requirements
Be aware that certain cards may have a criteria for acceptable candidates, such as a minimum earning requirement. These may or may not be displayed in your table of results.
Whilst comparison sites are a great starting point, they don’t necessarily provide all the information you require. Every person has a different credit rating, which will determine how much credit you will be granted at what rate, and comparison sites tend to present an average or standard result rather than one that’s specific to you. The best thing to do is to pick four or five of the best deals and then look into them in further detail to see what deals are available to you.
Visit the credit card provider’s website directly
Equally, not every credit card provider chooses to display their product on a comparison site, so you could be missing out on a better rate if you rely solely on a third party website. Also some comparison sites have strong relationships with certain firms, so you’ll be swayed towards one particular provider rather than getting an unbiased overview of the market. It’s worth visiting the top credit card provider’s websites to view their products and see what kind of deal you can obtain.
Things to look out for
It can be blinding being presented with so many options and so many figures, but what you need to pay attention to are three main things: the initial deal being offered – try and get a card with 0% interest on purchases, and look for 0% balance transfer promotions if you’re transferring debt from an existing credit card – the length of this deal and the APR once the promotion has ended.
How to use credit cards sensibly
The key to using credit cards in a sensible way is to pay off your debt at the lowest possible interest rate. This means that you might need to pick a card that has a higher APR once the initial 0% deal has ended, but the 0% deal lasts for longer than a comparable card with a lower APR. Overall you will be better off if you can repay the balance in full before the interest free period comes to an end on the ultimately higher rate credit card.
Our best piece of advice when it comes to credit cards is to proceed cautiously for taking one out. However, if you do decide a credit card is the best option, make sure you research the options thoroughly: using 2-3 comparison websites for a market overview before looking into the top deals individually should give you a sound grounding for finding the best credit card.