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How To Choose The Best Type of Credit Card For Your Circumstances

Guest post by: Al Shea

Article Overview: If you read the newspapers, watch television or go online, you'll see there are always new credit card offers coming onto the market almost daily, all with their own enticing offers and unique benefits to tempt you towards applying for their card. But which one is right for you? This article looks at how to review a credit card and select the best one for you.

How To Choose The Best Type of Credit Card For Your Circumstances

There is a wide range of credit cards available on the market for all different types of people, ranging from those with strong credits (who will benefit from a wider range of offers and lower APRs) through to those with poor credit ratings (who will not have such a wide range to choose from but may at least still be offered some form of credit at a higher rate to reflect the level of risk).

Typically credits cards fall into the following categories: 0% Credit Cards, Balance Transfer Cards, Travel Cards, Business Cards, Sport Cards, Reward Cards, Platinum Cards and Credit Builder Cards.

Below explains each type of credit card in more detail:

0% Credit Cards Explained:

This is a credit card that offers an introductory rate of 0% APR, often most useful if you don't have any existing balances on other credit cards you're looking to transfer over to this new card, and instead you simply want a great rate to buy things with during the introductory offer period. The 0% rate period will vary between providers, but generally you will find this period will last between 3-6 months before reverting to the providers standard APR rate. Check the small print though because the 0% rate will normally only apply to purchases made on the card, if you were to take money out using the card there may well be a fee. A 0% card means that you won't be charged insterest on the balance during the offer period as long as you make the minimum repayments each month, but again be careful to ensure that you do pay off the balance after the 0% period ends otherwise you'l be paying interest on it like any other card again. Look out for the APR the provider charges after the 0% period ends, and be sure to choose a card which has a reasonable standard APR if you intend to use it as a normal credit card in the future.

Balance Transfer Cards Explained:

Balance transfer cards let you move an existing balance from another credit card you already have (which will typically be charging you an APR) onto a new credit card with an introductory 0% APR offer covering that balance. This type of card is great for saving some interest charges on existing balances, but be careful to choose a credit card that best suits your needs. If you have a larger balance, look for a card that offers a 0% balance transfer that lasts for a longer period of time - some providers are currently offering 0% balance transfers for up to 12 months. Watch out for the balance transfer fees, typically up to 5% of the balance you're transferring, just do your calculations to work out that you will actually save money after taking into consideration this typical 5% transfer fee. Also check to see how much of the balance your new provider will allow you to transfer - you may find that if you have £2000 on another card you wish to transfer, the new credit card provider may only wish to allow a balance transfer of £1000 depending on how they rate you credit-wise, this figure should be taken into consideration when working out if a balance transfer is cost effective for you after fees, etc.

Travel Credit Cards Explained:

These types of credit cards often have specific benefits biased towards the travel industry, ideal if you are a frequent flyer or spend a lot of your time abroad. Their typical APRs are fairly standard in most cases, there are generally no introductory 0% offers or balance transfer deals but instead you get rewarded each time you use your card. Some examples of the benefits could be ongoing 0% on all your purchases abroad, collect airmiles each time you use your credit card, overseas emergency assistance and travel cover, and preferential rates on foriegn exchange.

Business Credit Cards Explained:

Many banks will offer your business a credit card facility to make your cashflow work better, there are various offers available for business credit cards - the rates are normally fairly standard across the board and the limit is based on your businesses historical credit rating. Unlike personal credit cards, business credit cards generally incur an annual fee per card issued, this isn't generally a large amount but can vary between providers.

Sports Credit Cards Explained:

Many football clubs are now offering their fans branded credit cards allowing them to pay ultimate homage to their club. Similar to travel credit cards, there generally aren't any 0% introductory offers, instead there are rewards biased towards their own industry. Typically the rewards involve contributions being made to their club each time they use their card, which can help the club grow further or help develop a youth team for example. These cards are handy to have alongside your existing credit card if you want to support your team in a more unique way.

Rewards Cards Explained:

Rewards cards are big business, mixing all the best offers in the market to attract your attention. There will generally be a wide selection of offers available to entice you, from 0% introductory offers to cashback incentive schemes each time you use your credit card. Some rewards credit cards partner with membership schemes such as Nectar, meaning each time you use your credit card you're earning nectar points which can later be redeemed against purchases. Some supermarkets have also released their own rewards cards, such as Tesco, which let you collect clubcard points on all purchases made using your credit card, often they run promotions such as double clubcard points when paying for your tesco shopping using your rewards card. Other forms of rewards cards donate money to charity each time you use the card, so there really is a wide variety on offer to meet your own requirements.

Platinum Cards Explained:

These types of cards are normally only available to strong credit customers, those people who pay all their bills on time and have no adverse credit rating against their name. Most platinum card providers don't charge an annual fee but it's worth checking still as some offer a range of excellent benefits but do charge for these extras. Many platinum cards have good 0% introductory rates or balance transfer offers available, followed by better APRs once the introductory offer finishes. Many of these providers only offer platinum cards to their existing customers so they aren't as widely available as standard credit cards.

Credit Builder Cards:

These credit cards normally have a much higher APR rate and a fairly low credit limit as they are aimed towards those people who have little or no credit rating, or those people who have adverse credit history from defaulting on other credit arrangements. These cards can help you repair your credit rating and encourage you to start using credit more responsibly again. By making your minimum monthly repayments it shows lenders that you are capable of paying back credit owed and gives them confidence to lend to you again. Of course, the rates offered are higher to reflect the higher risk element of non payment, but this type of card often offers you a credit line where no one else will, allowing you to start repairing your credit history and eventually be in a position to enjoy the benefits of standard credit providers again.

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