Picking a Credit Card That Suits Your Spending Habits
The kind of credit card you choose should depend on how you plan to use your card - different features suit different people's spending habits, and the cards that grab the headlines in the 'best buys' tables might not be the best for you.
If you.....
...Use your card as a convenient way of spending without having to carry cash, and pay off your balance every month, then:
The interest rate isn't particularly important, as you will not be carrying a balance. Instead look for a card that offers a cashback feature or rewards scheme, where you can build up benefits while you spend.
Also make sure you get a card with a decent interest free period on purchases - typically 50 to 60 days so long as you clear your balance in full every month. That way, you will avoid paying interest altogether.
...Use your card to fund larger purchases, paying them back over a period of months, then:
A low annual interest rate (APR) is important, to reduce the cost of your borrowing. Cashback may seem attractive if you're spending fairly large amounts, but getting a card with a lower APR will normally be more cost effective.
For example, a card with a rate of 14.9% and no cashback will be 'cheaper' than a card with a rate of 15.9% and 0.5% cashback, except maybe you're paying off your balance over only 2 or 3 months.
...Use your card to fund 'special occasion' purchases from time to time, eg holidays, presents etc, and also have a balance to transfer, then:
This is probably the way most of us use credit cards, and one of the new flat rate cards may be worth considering. These cards offer a low rate on both purchases and balance transfers without any of the introductory 0% offers that have been so popular in recent years.
This means that the card issuers can afford to offer permanently lower rates which won't expire after a few months, leaving you with a suddenly higher interest rate.
More info...
For more guidance on credit cards, see Choosing a Card, Beware of Balance Transfer Fees, and Credit Card Reviews.
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