How to choose the best credit card for you

What is a credit card?

A credit card is something you can use to borrow money. You need to pay this borrowed money back every month, or you’ll be charged interest on your remaining balance. The more debt you build on your credit card, the more interest you’ll be charged. 

So, the key to credit cards is to only spend what you can afford to pay back.

For more information check out our guides on how credit cards work and credit card tips.

How to choose the best credit card

In order to choose the best credit card for you, you need to know what all the different types of credit cards are and who they are suited for.

Balance transfer credit cards

0% balance transfer credit cards are designed to help you pay off high-interest credit card debt. You shift your original credit card debt onto the new balance transfer card which will charge 0% interest for a set period of time, up to 36 months.

This helps you pay off debt much faster as you are paying off the actual debt each month, not just interest!

Who are balance transfer credit cards for? These cards are suited to those who want to clear any existing credit card debt that they are being charged a lot of interest on. Great if you can pay off your debt before the 0% period ends.

Find out more about balance transfer cards here.

0% purchase credit cards

0% purchase credit cards allow you to borrow money to make purchases that you can then pay off without any added interest. This 0% interest period can last for as long as 20 months. If you pay back what you’ve borrowed before the interest-free period ends, then you’ll never pay more than you spent originally!

Who are 0% purchase credit cards for? These cards are perfect for people who want to spread the cost of a large purchase over a few months. You can buy something you wouldn’t necessarily be able to afford and pay it back slowly, without worrying about interest. Ideal if you can pay back what you borrow before interest kicks in.

Find out more about 0% purchase cards here.

Rewards credit cards

Reward credit cards reward you for spending money. You can earn airmiles, vouchers or cashback to spend how you wish. These rewards can end up saving you money on your everyday spending.

Who are rewards credit cards for? These cards are for those who will benefit most from the rewards on offer. For example, frequent flyers, regular spenders and people who shop at the same shop regularly. They can be very rewarding as long as you can pay back your balance in full every month. If you are paying interest, this will outweigh any benefits gained from rewards.

Find out more about rewards cards here.

Travel credit cards

When you make a purchase abroad, you are charged a non-sterling foreign transaction fee. Foreign transaction fees on most credit cards are 2-3%. Travel credit cards don’t charge this transaction fee, meaning you’ll spend much less when making purchases abroad. 

Who are travel credit cards for? Perfect for people who travel regularly and would benefit from avoiding foreign transaction fees.

Find out more about travel credit cards here.

Student/First credit cards

If you are a student without regular income or you’ve never had a credit card before, there are options for you! Student and first credit cards tend to have lower credit limits and higher interest rates. But they are a great way to get used to using credit cards and building up a credit history. 

Who are student/first credit cards for? These cards are great for college/university students or for people who haven’t had credit cards before. If you can spend sensibly, you can build up a strong credit score.

Read our guides on student credit cards and first credit cards for more information.

Credit cards for bad credit

Credit cards for bad credit have lower eligibility criteria than other credit cards. This means that people with bad or no credit history can still be accepted. These cards are designed to help people rebuild a strong credit history. There will be limitations and not as many benefits as other cards offer.

Who are credit cards for bad credit for? These cards are for people with bad or no credit scores who want to build a credit history.

Find out more about credit cards for bad credit here.

What to look for in a credit card

Here is a checklist of things you should compare when looking at what credit card is best for you. 

• Annual Percentage Rate (APR) - this is how much interest you’ll be charged annually for borrowing on the card if you don’t clear your balance every month. Watch out for ‘representative APR’, this is the interest rate offered to at least 51% of applicants. This means that the other 49% could be offered a higher APR, so you might not get the offer you want. 
• Minimum monthly payment - your card provider will set a minimum payment you must pay back each month. This is usually around 3% of the money owed. Try to clear your balance though to avoid interest!
• Annual fee - some credit cards charge an annual fee for owning the card. These charges usually offer extra benefits such as cashback or other rewards. Work out whether the rewards outweigh the fee.
• Other fees - compare what fees some cards charge and others don’t such as late payment fees, fees for using abroad and cash withdrawal fees.
• Introductory offers - purchase and balance transfer credit cards tend to come with introductory offers that charge 0% interest for a set period of time. Compare how long these interest-free periods last and what the standard interest rate is when the period ends.
• Rewards - some credit cards will allow you to earn rewards for every pound you spend. These rewards could be vouchers, airmiles, cashback and more. Make sure you pick a card that rewards your normal spending habits. These cards tend to charge an annual fee and have higher interest rates. So, make sure it’s worth it for you.

How to choose a credit card step-by-step

Let’s break down the process of choosing a credit card into actionable steps. When you are spoilt for choice, it can be harder making an informed decision. Thankfully, we are here to help!

Step 1: Check your credit score 

You can take a look at your credit report by asking any of the three main credit reference agencies, Experian, TransUnion or Equifax. 

The better your credit score, the more rewarding cards you will get accepted for. Manage your expectations before choosing a credit card to avoid disappointment and rejected applications.

Don’t worry about the impact checking your credit report has. These checks aren’t recorded on your credit report and only the credit reference agency will know about it. 

If, once you check your report, you discover that you do have a poor credit score, avoid applying for popular credit cards. Instead, take a look at credit cards for bad credit.

Step 2: Decide what you need a credit card for 

Next, think about why you want a credit card and what you’ll be using it for. 

There are three main types of credit card:

1. Cards to improve your credit score (student, first and bad credit cards)
2. Cards to save money on interest (purchase and balance transfer cards)
3. Cards to earn rewards (rewards, cashback, airmiles)

Deciding exactly why you need a credit card will help narrow down your options to just one or two different types of cards. Make sure you pick a card that is beneficial to you.

Step 3: Examine your spending habits

Looking at what you already spend your money on can be a fantastic way to help choose a credit card that will complement these existing habits. 

If you spend money sensibly, then you’ll know that you can pay back your balance in full every month and avoid interest. This means that you could benefit from a rewards credit card.

However, just any rewards card won’t suit everyone. You can earn rewards in the form of air miles, food vouchers, shopping vouchers and more.

Take a look at where you usually shop and what you spend your money on. Then pick a card that aligns with your shopping habits. You can then continue to spend as usual but earn back points because you are using a credit card that works for you. 

Step 4: Ask the right questions

There are a few things to ask yourself depending on what type of credit card you are looking at. Ask the following questions to help with your decision:

• Does paying an annual fee make sense? If a card offers a £100 sign-up bonus but charges an annual fee of £99, then it might not be worth it. Or, do the rewards you earn through the card in a year add up to £100 and the annual fee is only £20? Do the maths and figure out if the annual fee wipes out any benefits.
• Will this card help me build my credit? Make sure you’ll be able to build a strong credit history on your card and won’t be tempted to spend irresponsibly.
• How long is the 0% interest period and what’s the usual rate? Make sure the interest-free period on your card lasts long enough to pay back your balance. Also, find out what the standard interest rate is because this could sneak up on you.
• How much are my rewards worth? Earning 10 points per pound spent sounds amazing. However, if those 10 points are only worth 50p in total, it might not be such a great deal. 
• How complicated is this card? If you have an airmiles credit card, for example, and you are only allowed to book flights on a particular day, to a particular destination and only a particular seat, then maybe a cashback card would be less hassle!

Step 5: Compare credit cards

Once you’ve narrowed down your search to a particular type of credit card, you can now begin to compare these cards.

Take your time comparing and decide which aspect is most important to you. For example, if one card charges 30% APR but has no annual fee whilst another charges 25% APR and an annual fee, think about what’s more important. 

If you know you’ll clear your balance in full every month, then the higher APR shouldn’t affect you. However, if you know some months you won’t be able to clear your balance, taking the lower APR and paying an annual fee might be the better option.

Step 6: Check the eligibility criteria

The standard minimum credit card requirements are as follows:

• Age - you must be over 18.
• Salary - some credit cards will require you to be earning at least a certain amount of money or to be in full-time employment.
• Financial history - if you have been bankrupt before or have a County Court Judgment (CCJ) you might not be approved.
• Credit score - your credit history and score are key things lenders look at.

However, some lenders will require an excellent credit history and a higher salary in comparison to other credit cards. Always double-check this before setting your heart on a particular card.

Step 7: Apply for the card that gives you the most value

At the end of the day, what sets credit cards apart from debit cards is that they can offer you value in return for spending on them (although some debit cards also offer cashback!). This value can be in the form of rewards or a strong credit history. Therefore, you want to make sure that you pick a credit card that will benefit you the most.

So, does your credit card go the extra mile?

For example, with student and first credit cards, do you have the option to increase your credit limit over time?

Or, with rewards cards, is the required spend reasonably low to qualify for any sign-up bonus points?

Try to pick a card that goes above and beyond to benefit you.

How to apply for a credit card

Now that you have finally picked one credit card, how do you go about applying for one?

There are many different ways you can apply for a credit card:

• Online
• Via post
• In-store at a branch 
• Over the phone

You will have to fill in a form and provide the following information:

• Full name 
• Address
• Date of birth (need to be over 18)
• Employment history and current status
• Income
• Nationality 

BUT before you apply for your chosen credit card, please keep in mind the following:

1. Use an eligibility checker first

Before you apply for any credit card, you should always use an eligibility checker first. Most of the major credit card providers will have an eligibility checker on their website. This will tell you how likely you are to be accepted for the particular card you want to apply for.

This check conducts a ‘soft search’ which won’t appear on or damage your credit history.

If the checker says you are unlikely to be accepted, DON’T apply but look for a different card instead.

2. Be careful when signing a credit agreement

Should your application be accepted, you will be asked to sign a credit agreement. This is a binding legal agreement between you and your credit card provider. 

It defines the following terms:

• Your credit limit (how much you can borrow)
• Your minimum payments
• Your payment dates
• Interest rates
• Fees & charges
• Your rights & responsibilities
• Any other conditions

If you are ever in doubt regarding your credit agreement, always ask your provider questions. They are legally obligated to provide an adequate explanation of all of the key terms so don’t be afraid to ask.

3. What if my application is refused?!

If you have a low credit score or poor credit history, lenders might reject your credit card application. Don’t panic if this happens, it isn’t the end of the world!

You can ask your credit card provider which credit reference agency they used so you can request a free credit report from the same agency. If you believe any of the information is wrong on your credit report, you can get this changed which could improve your score.

The key is patience and taking the time to improve your credit rating by being sensible with money. We offer some advice on how to improve your credit rating in this guide.

4. EVERY credit card application is reported on your credit file

Only ever apply to one credit card at a time, if you get rejected or need to apply for another, you should wait at least a few months.

This is because every single credit card application is noted on your credit report, whether you get accepted or rejected.

If lenders see lots of recent credit card applications, they might believe that you are in financial difficulty and desperately need money. This will make them much more likely to reject you. This is why eligibility checkers are great to use before applying.

I can’t meet my minimum credit card payments due to coronavirus. What should I do?

Coronavirus has put a financial strain on many. If you have a credit card and are struggling to meet your minimum repayments, you may be eligible for help.

The Financial Conduct Authority (FCA) has introduced measures that allow you to request a freeze on credit card repayments for 6 months. However, you may still be charged interest in this period.
You have until the 31st March 2021 to request a freeze but make sure you agree with your lender before stopping repayments. This won’t leave a bad mark on your credit history either due to the exceptional circumstances.

If you can afford to keep paying, it’s best to do so as you will still be charged interest during this holiday period.

All payment holidays must end by 31st July 2021.

FAQs