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Choosing a credit card

Credit cards can be a great help. They can be useful as a backup, especially in an emergency, and some people like to use them to spread the cost of a busy month or two. But because they charge pretty high interest, credit cards can also be an expensive way to spend. That’s why some people can end up with a debt that they struggle to manage. It’s one of the reasons that it’s important to spend time deciding which credit card is best for you.


There are eight different types of credit cards that you can check out with These include zero percent balance transfer credit cards, where you can move your debt from your current card to a new one, and you won’t have to pay interest (although you may have to pay a fee to transfer the balance). Some cards will also offer you zero interest on your spending. This kind of card is sometimes called a balance transfer and purchase card.


Other types of card include cashback cards and rewards cards through to low APR cards and cards from your own bank. This guide will explain the different kinds to help you understand which might suit you best.


But let’s quickly go back to basics and talk about how credit cards work.


How credit cards work


After a successful card application, you’ll be sent a card that you can use in many shops, restaurants and other businesses around the world. You’ll be set a limit on your spending and receive a bill each month.


If you pay off the full balance of the card each month, you shouldn’t pay interest (subject to exclusions and terms of your card). But if you can only afford to make a smaller payment (you have to meet a minimum confirmed by the provider) you will have to pay interest on the balance left on the card.


Check the APR


The APR helps you understand how much it could cost you to use the card. The APR rate is one way to compare how much using a credit card will cost. So if the APR on a card is 17 per cent and you spend £1,000 on it, the interest and charges will mean that you are spending £170 on top of your debt. In the end, then, you will be paying back £1,170. Don’t forget there are other types of fees to take into account such as balance transfer fees or late payment charges.


Our credit cards page shows you the main eight kinds of credit cards. Let’s look at each of these in turn.


Zero rate cards


The first kind are known as zero percent balance transfer credit cards. They could be useful if you have a credit card already and are being charged a lot of interest on the balance that’s outstanding. Once you’ve done your zero percent balance transfer the new card will guarantee not to charge you interest on that amount for a set period of time, say 12 or 24 months. However, it’s worth noting that most cards will have a balance transfer fee that will be applied when you move the balance over.


Purchase Cards


A second sort of zero percent credit card promises not to charge you interest on what you spend for a set amount of time. After that point you will start being charged interest, so if you do run up a debt on the card it could become expensive.


Some zero rate credit cards may offer you both of those things – zero percent balance transfers and also zero interest on your spending. You need to check the details carefully so that you know exactly how long the offers last for, and there may be other terms and conditions.


Rewards and cashback


The next two kinds of cards work differently. Rewards cards and cashback cards will both give you something back for spending money on the card. You might gain loyalty card points or travel points (like Avios), or receive money off your credit card bill, depending on how much you use the card each month.


These cards often have high APRs, so they are best suited to people that usually pay the full balance on the card every month. If not, the interest you owe will probably be more than the value gained in your rewards. It’s unusual to find a zero percent balance transfer offer for these cards.


Low APR cards


If you don’t pay your balance every month, a low APR credit card could suit you. These cost a lot less to use in charges and interest. Typical zero percent interest credit cards and rewards card might have an APR of 15-25 per cent, while a low APR card might offer somewhere between 6 and 15 per cent. Some of these cards also include zero interest credit card offers which could be useful.


Bank cards and credit builders


There are two final kinds of card that we haven’t talked about – cards from your bank, and cards that build credit.


If you get a card from your own bank, they know you and your history, and so might give you more credit than you get elsewhere. If you’ve previously been turned down for a credit card, there are certain cards that help you improve your credit score and open you up to other card options in the future. These will offer low limits, stay within them and pay regularly and you’ll build up your credit rating for the future.


Do bear in mind that if you’re asking yourself “which credit card is right for me?” one way of safe spending is to avoid credit cards if possible. But we know that zero credit cards and the others we’ve mentioned can provide people with a convenient way to buy. So use to help find the best credit cards for you, whether it’s one offering zero balance transfers or something totally different. - the easier way to save

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