13:17 06 March 2013
Have you ever walked into your bank to pay in a cheque or make a transfer, and left with a new credit card on its way? Or perhaps you've opened some marketing mail that's landed on your doormat and plumped for that card because of the convenience?
In either case you could be costing yourself unnecessary interest or missing out on some great rewards - just because you've not picked the correct credit card to suit your circumstances. So, here are five questions to ask yourself before choosing the plastic for your wallet.
1. Have I already got debt sitting on another card?
If you already have debt sitting on another credit card, saddling yourself with more of the same is not going to do you any favours. Especially as average credit card APRs (annual percentage rates) currently sit at a crippling 17.32%.
In this instance a 0% balance transfer credit card could be your best bet.
Balance transfer cards come with varying interest-free periods, and market leaders Halifax and Barclaycard currently offer a whopping 25 months. This would give you more than two years' breathing space to get your debt paid off at no cost, as well as give you the option to spend on the cards at 0% interest, for three months and six months respectively.
Be careful not to rack up more debt though, as the representative 'go-to' APRs after these 0% purchase timeframes are up, are both 18.9% (variable).
Watch out also for the balance transfer fees which are 2.9% in the case of Barclaycard and 3% in the case of Halifax.
You'll be able to compare a whole host of balance transfer card options at MoneySupermarket's balance transfer credit card channel.
2. Will I use the card to borrow the cost of new purchases?
If you are planning on making a large purchase, such as a car or holiday, which you want to pay off in monthly instalments, a purchase credit card with a long 0% period will allow you to do this without paying a penny in interest.
For example, the Tesco Clubcard credit card offers a market leading 16 months interest-free on purchases, as well as the chance to earn Clubcard points at an accelerated rate.
The M&S Credit Card offers 15 months of interest-free spending and comes with the added benefit of option to earn M&S points when you shop.
Just make sure you plan ahead to ensure you will pay the money back before the interest-free period ends, or you're likely to be hit with a hefty APR. Both Tesco and M&S card for example charge 16.9% (variable). The best way to do this is to set up a direct debit every month to make sure the balance gets paid.
3. Do I go abroad a lot?
When the sun is shining and you're feeling care-free on holiday, it can be easy to reach for the first piece of plastic you see in your wallet. However, you won't feel quite so relaxed when you return home to a massive credit card bill.
This is because extra charges are usually imposed by credit card companies when you spend abroad, for instance a foreign purchase or a 'loading' fee every time you use your card, which can be as high as 2.99%.
Therefore, if you head overseas a lot and don't have existing debt, a card specifically designed for the purpose is likely to be your best bet.
The Halifax Clarity card for example charges a 0% fee for use anywhere in the world - you can even transfer an existing balance to the card for no fee. You should be sure to clear the balance every month though as a representative APR of 12.9% will kick in from the start.
Nationwide's Select credit card doesn't charge foreign usage fees either, and even pays 0.5% cashback on purchases within the UK. It's also currently offering a 50% reduction of its balance transfer fee bringing it down to 1.55%. In order to to qualify though, you will need to be an existing customer with the building society.
4. Will I pay the card off every month?
You should always endeavour to clear your credit card balance every month - and if this is your plan, you have no debt, and will not need the card to borrow for future purchases you should consider some plastic that offers reward or benefits.
The Barclaycard Freedom Rewards card for example, rewards you with points when you spend on the card which you can then turn into Freedom Rewards vouchers.
These vouchers can then be exchanged on the high street, and you get the option to earn double points on your supermarket and petrol spend.
There is also a variety of cashback and rewards cards available on MoneySupermarket's credit card channel.
5. Is there a particular store or supermarket I shop in frequently?
If there is a retailer or supermarket where you frequently shop, it may be more useful to opt for a credit card that will reward you for spending on your card there.
For example, Tesco, Sainsbury's ASDA and M&S all offer credit cards that favour customers in terms of perks and points that can be redeemed in store.
So, with a little bit of time spent deciding on the right credit card, it really is possible to make your debt suffer less, or your spending give you something back.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We're free, independent and compare all UK credit cards, as well as offering exclusive deals you can't get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David's Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2013.
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