Choosing The Right Credit Card

Credit CardsCredit cards have a bad reputation in some circles. But when you choose your card carefully, they can actually be a big help when managing your finances. The problem is, many people don’t really take the time to properly research credit cards before registering for one.

A credit card can help you manage your finances in various ways. You can spread the cost of purchases, perform a balance transfer, collect rewards, reduce the need to carry money, and build up a strong credit score. They can even help you deal with emergency situations when you might be strapped for cash.

There are plenty of benefits that are exclusive to credit cards. But it is essential that you choose the right one for your needs. The good news is that there are hundreds of different credit cards available these days. So, whatever your requirements, there will be a suitable card for you.

However, with so many cards available, it is important you invest time comparing each provider’s offering. If you select the wrong card, you could end up with unmanageable interest rates and fees. In this case, rather than helping you manage your finances, a card could easily make your financial situation worse.

What To Look For:

Annual Percentage Rate (APR) – If you don’t pay off the balance each month, you will be charged by the APR on the card. To ensure you get the best deal, you should compare the APR on each potential credit card. However, the APR isn’t the only charge/fee to consider.

Rewards/Loyalty Points – Many credit cards have reward/loyalty points that build-up as you use it. You can then use these points towards future purchases. You can often only get points if you shop at certain places. Therefore, when choosing a credit card, be sure to examine the fine print.

Interest Rates – You will usually be charged interest on credit card repayments. But some credit cards offer 0% interest over a period of time. These help you save money while you’re managing your repayments.

Minimum Repayment – If you have a credit card balance, this is the minimum amount you will need to pay off each month. To ensure you can manage your repayments, find a credit card with low minimum repayments. And try to exceed the minimum repayment threshold to save money and maintain your credit score.

Eligibility & Application Process – To ensure you can make an application for a credit card, you need to be eligible. Every provider will have different registration criteria. Some are quite simple while others are more strict. Credit history, age, occupation, and income are just some of the criteria credit providers look for.

Credit Card Types:

These days, there are plenty of credit cards up for grabs. Being aware of the difference between cards can help in your search. Below is a roundup of some of the main types of credit cards currently available.

0% Balance Transfer Cards

These credit cards let you move existing credit balances to a 0% interest card. This allows you to consolidate your debts. You also won’t have to pay interest on the outstanding balance for a set period of time. Having said that, some cards may still charge fees to transfer the money.

Cards For Improving Poor Credit

Many credit cards are designed to help you build-up a stronger credit score. These cards typically have high APR percentages and more generous eligibility rules. However, in order to improve your credit score, it is essential that you meet your monthly repayments.

Cards For International Use

Often referred to as travel cards, these are designed for overseas/international use. And unlike your regular debit card, you won’t get charged extra fees for using them abroad. Specialist overseas cards can save you a lot of money when travelling. But you will need to pay your monthly charge in full if you want to avoid potentially high-interest rates.

Low/Fixed Rate Cards

Low interest rate cards have a low APR introductory period. But after a set time, this will increase to a higher rate. Fixed-rate cards are similar but are fixed at a constant low rate. These cards are useful for paying off large debts over a longer period of time. Although they can still have hidden fees and high charges if you miss a payment.

Cashback/Reward Cards

Reward cards let you build-up points, which you can then exchange for cash, money, or other goodies. The rewards come in many different forms. For example, if you travel regularly, you may want a card that rewards you with air miles. Likewise, if you shop in a particular supermarket or store, registering for the company’s card could save you money over time.

Cashback cards work in a similar manner. However, instead of points, you earn money for making purchases. It is usually around 1% of your total purchases, although it can be higher under certain criteria. Just like reward cards, cashback cards usually require a high credit score. And you might need to pay an annual fee as well.