Choosing a Card

The trick to choosing a card is to decide exactly what you want a credit card for. Is it the convenience? Ownership of the little bit of plastic cuts out the necessity to carry chunks of currency around. Or do you want a card that will play its part in your budgeting, enabling you to enjoy your purchases immediately and pay for them gradually over the coming months?

Also, are you disciplined enough to use a credit card responsibly, paying the monthly bill in full, thus avoiding any interest charges?

If it is simply a matter of convenience and you are confident that you will always pay up in time, then frankly it doesn’t which type of card you choose. Credit, debit, store, charity – if you stick to their rules you need never pay interest.

Those on tight budgets, who have an inflexible weekly or monthly income, might do better to stick to a straightforward debit card where the money comes out of your bank when the purchase is made so there’s no chance of you getting into debt.

But if you intend to take advantage of the credit facilities and use a card that offers time to pay, the percentage rate you will pay for borrowing is crucial. APR – Annual Percentage Rate – is the percentage of interest you will have to pay on borrowings over a 12-month period. By law, all card providers have to tell you what the APR they offer is. You will see some startling variations, from as low as 6 per cent to as high as 30 per cent or more. Don’t be conned by adverts that quote monthly rates which appear to be low, it’s the APR you are looking for.

The introduction of 0% credit cards changed the playing field for consumers for the better. For example, in the Nineties, annual interest rates of 20%+ APR were standard. However, with companies now competing harder than ever to capture new customers, these days you can find cards offering 0% interest if you switch over to them, and charging standard interest rates of under 10% APR. Given that the average balance per cardholder is roughly £1,500, there are substantial savings to be made from switching debt from a card charging, say, 18% APR to a 0% card.