Home > Loans > Choosing a Credit Card

Choosing a Credit Card

By: J.A.J Aaronson - Updated: 23 Jan 2013 | comments*Discuss
Credit Card Interest 0% Penalty Charges

The variety of credit cards available to British consumers can be overwhelming. Considering the impact that they can have on an individual's financial well-being, the number of people who sign up for cards without any research whatsoever is staggering.

Personal Habit

The card you choose will, to a great extent, be determined by your own spending habits. If you anticipate that you will use your credit card often, then your choice will likely be different than if you were to spend only rarely on plastic. Similarly, if you have a bad credit rating then your choices will be reduced considerably. If this describes you, you may find it useful to see the guide elsewhere on this site concerning repairing your credit score.

First of all, you should look at whether or not each card has a grace period. This is the time between making a purchase with your card and being charged interest, and can be as long as 59 days. Some cards, however, do not have a grace period, and you will therefore start paying interest from the second you use your card. You really shouldn't take a card which does not give you a grace period, particularly if you are intending on paying off your balance on time every month.

Introductory Deals

Most consumers use the interest rate as the most obvious point of comparison for credit cards. However, if you are confident that you will pay your bill within the grace period every month, this is of little consequence as you will not pay any interest. If, on the other hand, you think that you will probably use the card to borrow (that is, you will not pay off your balance on time), then the interest rate will be important. You can generally expect to pay around 16% interest on overdue payments. However, you can save considerable sums of money if you shop around and take advantage of credit companies' introductory deals. Many companies are now offering 0% interest for a set period when you first open your card, which may be up to 12 months. You should read these carefully, as this only applies to balance transfers with some deals. Others, however, truly do offer 0% on purchases and so, if you are willing to change your card at the end of each introductory period, you could conceivably avoid having to pay interest at all.

You should also bear in mind that few cards offer a grace period on cash withdrawals. Different companies offer different methods of withdrawal, but you will generally either be able to take money out of an ATM or you will have to write yourself a cheque. You are likely to have to start paying interest on withdrawals immediately although, if you anticipate that you will use this facility often, it may be worth shopping around to find a card which offers a grace period for cash.

Extra Charges

It is also important to be aware of some of the 'hidden charges' associated with credit cards. Most companies will impose a penalty if you miss your minimum monthly repayments, or if you exceed your authorised credit limit. As many consumers are now realising, these charges are in fact illegal. If you find yourself a victim of these charges, try reading the guide on dealing with penalty charges elsewhere on this site. Of course, the most effective way of avoiding such penalties is by not getting into a position in which the company can charge you in the first place. It is wise, therefore, to set up a direct debit from your current account in order to ensure that you pay back at least the minimum required amount every month.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • Lolly
    Re: A Guide to Unemployment Benefits
    Hi i am currently working in the care sector my age is 61 i have been trying to get varicose viens removed for 7 years plus…
    16 May 2019
  • Dave
    Re: Taxation for the Self-Employed
    I am PAYE and Self Employed through CIS. I earned £41k in PAYE and a mere £3500 self employed, (before tax) I have a…
    24 April 2019
  • Stanharris
    Re: Renegotiating Your Loans
    Thanks for sharing a valuable information. It is really informative and helpful. the information that you have shared is really useful.…
    4 April 2019
  • Oggy
    Re: Taxation for the Self-Employed
    I’m a construction worker on cis can I claim back my 20% tax back on my first 12k tax is deducted before I’m paid although I’m…
    1 April 2019
  • Caz
    Re: How Much Tax do I Have to Pay?
    Iv just started working for an agency I will be played weekly they not taken out tax and national insurance I have to have my…
    23 March 2019
  • SylviaBlood
    Re: A Guide to Unemployment Benefits
    an you help me pls I had operation on my kidney followed by chest infection I then went profound deaf had cochlear implant…
    19 February 2019
  • sylv
    Re: A Guide to Unemployment Benefits
    i returnee red to work after 2operations I was on ESA support group con based. I went to work I had my hours cut but unable…
    19 February 2019
  • Jax
    Re: How Much Tax do I Have to Pay?
    I earned £924 for working 99 hours last month yet between tax and national insurance Im just bringing home £690 is this right?
    24 January 2019
  • Stuart55
    Re: What is a Stakeholder Pension?
    I was put into a pension scheme by my works, in 2002,I left after 1 year and i only paid £900, into the fund, since then I have…
    12 January 2019
  • Bpro
    Re: A Guide to Unemployment Benefits
    I have been a self-employed taxi driver for the last 8 years, but but unfortunately two weeks ago I received a driving ban…
    20 December 2018