How to choose the right credit card
There are so many credit card options that it can be hard to know what to choose
If you want a credit card, it is a good idea to first think about what you will be using the card for. There are a variety of credit cards on the market and each one comes with a different set of benefits. You will also need to consider your credit rating when applying for a credit card, as some options will only be available to consumers with good to excellent credit ratings. For example, if you have a poor credit rating it is likely that you will only be able to receive a prepaid debit card or a secured credit card with a low credit limit. If you have a good credit rating the credit limit given to you by the credit provider may be higher and you may be eligible to receive additional benefits. We have listed several different credit card options below and highlighted situations where they may be a good choice.
Balance transfer credit cards
Balance transfer cards allow the consumer to transfer outstanding balances from existing credit cards to a new card. Balance transfer cards usually offer a length of time where 0% interest is paid, allowing you to lower the overall interest rate you’re paying. If you want a balance transfer credit card you should look for cards with the longest 0% balance transfer time period to allow you to have as much time as possible to pay off your debt without incurring interest rates or fees. Balance transfer cards will sometimes have additional charges for the first balance transfer, which is usually a percentage of the amount transferred to the card. You should look for a card with a low percentage fee. Some cards may offer a 0% balance transfer fee.
A low APR credit card is one where the interest rate is lower than the market standard. These credit cards are a good option for consumers who are carrying a balance from one month to the next and incurring interest rate fees. However, these types of credit cards are usually only available to consumers with a good to excellent credit rating. When comparing low APR credit cards, you should look out for penalty fees and penalty interest rates that may increase the overall cost of the card. The interest rates disclosed by the credit card provider will likely be a range, and the actual interest rate you will receive will depend on your creditworthiness.
No annual fees
Some credit cards will charge an annual fee for using the service, whilst others will not. If you do not want to pay an annual fee you should look for credit cards that advertise no annual fees. No annual fee cards can still offer competitive interest rates and, in some cases, a period of time where the interest rate is 0%. The card may still come with additional benefits such as air miles, cash back or travel insurance. When comparing no annual fee cards, look out for benefits from the card provider that are most relevant to you. For example, if you travel a lot, a card that earns you air mile points may be more relevant than a 0% balance transfer card.
Prepaid cards are not a form of credit, meaning no credit check will be undergone on you prior to being accepted for the card. The money available on a prepaid card is debited from your bank account prior to use. This card is a good option for consumers who have a poor credit rating but want to receive the benefits of a credit card such as online purchase insurance and zero liability for fraudulent card use. Prepaid cards can incur high fees and therefore may not be the best option if you have the ability to use a debit card or checking account
Secured credit cards
Consumers applying for a secured credit card are required to provide a cash collateral deposit, which serves as a credit line from the card issuer. These cards may be a good option for if you have struggled to get an unsecured credit card due to a poor credit rating and want the chance to rebuild your credit score. Unlike prepaid cards, secured credit card issuers will report your payment history to credit bureaus, allowing you to improve your credit rating over time. When comparing secured credit cards look out for the monthly fees and interest rates offered by the provider. Consumers should also review the card benefits provided and chose a card issuer that offers benefits most suited to their personal situation.