Which Credit Card Should I Choose?

Do you intend to pay off your credit card balance in full each and every month?

Your answer to the simple question above will help determine which which credit card is right for you. 

Credit Cards for People Who Don't Intend Paying the Balance in Full Each Month

If you don't feel you will be paying the credit card balance off in full each month, and for around half of credit card users this is the case, the most important factor is the interest rate. Without clearing the debt in full each month then you need to minimise the interest you pay, so go for a card that offers a 0% introductory rate.

Interest Rates

Many cards offer 0% introductory rates of interest in order to attract new users. Some of these offers just relate to balance transfers from  from another card and not to any new purchases you make. Whilst some cards offer 0% rates for both balance transfers and purchases. Ideally, you want a credit card that offers a good introductory rate and a competitive ongoing rate.

When comparing interest rates always use the APR (Annual Percentage Rate). This allows you to make reasonable comparisons and, by law, it has to be published when credit cards companies are looking for your business.

Switching Credit Cards

As most of these 0% credit card introductory deals typically last for six months, it is possible to switch credit cards when the 0% introductory period has finished. 

If you do switch regularly, it should not have an impact on your credit rating, according to credit reference agency Experian, even though every credit check will leave a "footprint" on your file.

Jill Stevens of Experian said: "If you start at one end of Oxford Street and apply for credit at every shop, the lender can see the record and will think it is a bit peculiar - it may look like you are committing fraud.

"But we only keep search records for a year and lenders are only going to think something is odd if the behaviour is abnormal. To get a new credit card now and again has become common behaviour."

The difficulty could come if you forget that the zero per cent period has ended, or are too busy to switch your cards again in six months' time.

Consistently Low Standard Interest Rate

For people who might find changing cards every six months a hassle or who are unlikely to remember to change cards, it might be better to opt for a card that offers a consistently low standard interest rate.

However some credit card issuers will assess your personal circumstances and credit history to determine the interest rate available to you. This may result in you being offered a credit card with a different rate than that quoted. 

Credit Cards for People Who Intend Paying the Balance in Full Each Month

If you expect to pay off the balance each month the interest rate is not so important so you should look for a card that offers the best rewards and cashback. 

However, you should take into consideration the interest rate as you never know what the future holds. You may not be able to pay off your bill in future or you may simply forget on the odd occasion.

Loyalty / Reward Schemes

Loyalty schemes, offering things such as air miles or cash back, are gaining in popularity. Although research indicates that these are one of the most important factors we consider in deciding which card to choose (after interest rates) the benefits are often fairly marginal.