If you're in the market for a new credit card, there is a bewildering array of cards to choose from. There are even more incentive offers, so how can you decide on the card that is best for you? Here are some of the factors to consider.
What Kind Of Payer Are You?
The most crucial question is whether you are a person who clears the credit card every month or whether you always leave a balance on the credit card. If you pay up at the end of every month, then you can go for a credit card that offers an incentive. If not, then you need to look at the annual percentage rate (APR) on the card. If you know what your typical credit card balance is, look at the illustrations given by card issuers to give a guide to how much you might have to repay over time.
Taking An Interest
Even with interest rates, you need to be careful. Although your new credit card may come with a 0% balance transfer rate, this is not the only rate to think about. Look at the rate on purchases or other transactions to see what you might be paying. And remember that any payments you make are likely to pay off the transferred balance first, while any new spending accrues interest.
Hand in hand with the interest rate goes the interest-free period. This is the delay between spending money on the credit card and being charged interest. This can vary considerably depending on the card you choose. The interest free period can be as much as 56 days. And it's how you use it that counts. If you put major spending on the credit card after the statement date, you have a month till the next statement, and then a few weeks to make the payment. This can be a good way of managing cash flow.
Look At The Fees
There are three types of fees that count with credit cards. The first is the cash withdrawal fee. Many credit card issuers charge you for withdrawing cash at an ATM. These fees can be around 2% of the transaction. The percentage is even higher when withdrawing cash abroad. If you must use the credit card, then you're better off making one large withdrawal so you don't pay the minimum fee each time.
Getting Some Cash Back
Many credit cards offer annual cashback deals which are great for people who clear their balance every month, but not so good for others. If you don't clear your balance, the interest charged will wipe out any cashback gains. There are also reward points schemes that allow cardholders to earn money from their spending – and spend it again with a variety of high street and online retailers.
Paying attention to these items will help you to choose a credit card that will match your financial situation.
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