Which Credit Card
With so many credit cards in the UK market, choosing one can be a difficult decision. We offer adivice on deciding which credit card may be right for you. When deciding which credit card to choose, there are a number of factors to be taken into account. If you are not planning to pay off the outstanding amount each month then the most important factor will probably be the interest rate charged.
Below is a list of issues which should be considered when choosing a card. Your circumstances will dictate which factors are a priority.
- introductory rates: many credit card providers are now offering introductory rates to attract new customers. The introductory rate can be as low as 0% and the introductory period ranges from a couple of months to a year.
When an introductory rate is quoted by a credit card provider, check the following:
- how long does the introductory period last? Is it until a specified date or for a set period after you receive the card? Offers that specify a date can be deceptive as it takes time to receive the card and transfer the balance, eating up a chunk of the low interest period.
- what does the introductory rate relate to? Is it for transferred balances only, new purchases only or both?
- what will the interest rate be after the introductory period?
- usual interest rate: what is the rate of interest charged following any introductory rate? Interest rates vary dramatically. As at June 2001, the standard APR (Annual Percentage Rate) on offer varies from 8% to 29.8%.
- interest free period: does the card offer an interest free period? Most cards only charge interest from the statement date. Others calculate interest from the date of the transactions you make. What is the maximum interest free period? In most cases this is 56 days.
- cash withdrawals: the interest rate charged for 'cash advances' is normally far higher than the rate that applies to new purchases or transfers. If you tend to use your credit card for cash advances, what interest rate will be charged?
Also, bear in mind that interest is charged from the date of the cash advance. No interest free period applies for cash advances, otherwise you would be able to borrow interest free indefinitely by using two cards and withdrawing cash on one to pay the other each month! - balance transfers: most credit cards allow you to transfer a balance from one or more other credit cards. What is the interest rate applied to these balance transfers following any introductory period? You should only transfer a balance if it means you will pay less interest.
- annual fee: does the card issuer charge an annual fee for holding the card? With so many cards available there is no need to own a card that charges an annual fee, unless that card offers benefits that outweigh the cost of the annual fee.
- consumer protection: does the card offer consumer protection? If so, does the item have to cost over a specified amount in order to be covered?
If you make a purchase on your card and that purchase turns out to be faulty and the retailer refuses to cooperate by replacing it or refunding your money, you can make a complaint to the card issuer.
MasterCard or Visa will investigate the case on your behalf; if they consider your claim to be valid. They are in a position to force the supplier to comply, with the ultimate threat of withdrawing the Visa or MasterCard membership. This can be particularly useful in situations where you have bought something from a supplier who subsequently goes into liquidation. - travel insurance: many cards offer travel accident insurance. However, check the small print to determine exactly what is covered and what the conditions of cover are. For example, do you need to purchase a holiday in full on your card? Paying for your holiday's deposit using another means may invalidate your insurance, even if the balance is paid using the credit card.
- cash back: some cards offer cash back on all purchases, usually between 0.5% and 1%. Egg offer 2% cashback on purchases made online via their 'shopping zone'.
- reward schemes: various reward schemes are available from air miles offered by Air Miles Card, Coutts & Co and Natwest Bank to reward points offered by Sainsburys Bank Card, Tesco Visa and Thomas Cook which can be redeemed against their goods and services. (This is not an exhaustive list.)
- charitable donations: donation cards are credit cards where the card issuer makes a small donation to a charitable cause each time the card is used, at no additional cost to the card holder.
- online fraud guarantee: some credit cards offer an online fraud guarantee stating that you will not be held responsible for unauthorised charges against your card which are incurred as a result of using your card online.
- style: if you have narrowed down your choice to two or three cards, or you are highly image conscious, you might want to consider the look of the plastic card itself. For example, the 'American Express Blue Credit Card' looks pretty stylish!
