Credit Cards – Pick the Right One For Your Circumstances

by Mike

Credit cards can be a great personal finance tool, but to make the most of your plastic it’s imperative that you choose the right card for your circumstances.

So before applying for a new credit card you should make sure you’re clear exactly why you’re applying. If you are consolidating debt then a balance transfer card may be best for you, if you have a low credit score then a card designed for credit building could be what you need.

Below are some of the different credit cards currently available so you can see which one best fits your needs.

Balance Transfer

Balance Transfer credit cards allow you to move existing credit card debt over to a card provided by another lender and sometimes offer an interest free period as an incentive to switch providers.

This type of card could be beneficial to anyone with outstanding balances on several credit cards as the debt can be consolidated onto the one card, making it easier to keep track of your monthly repayments and how much you owe.

Another advantage is that you will pay less interest on your borrowings, at least for a certain period of time. This means that more of your monthly repayments will go to paying off the actual debt and not to the credit card companies I interest payments.

On the downside, many lenders now charge a  transfer fee, which can be anything up to five per cent of the balance that you are transferring, so this needs to be taken into account when considering whether a balance transfer card is the right option for you.

Low Standard Rate

Low standard rate cards are sometimes a good alternative to balance transfer credit cards, particularly if you feel that you will not be able to clear the debt by time the interest free period ends. If this is the case then you may find that once the introductory period is over and the standard interest rate kicks in then the balance transfer may actually have been counter-productive.

If you take out a low standard rate credit card then you will not be hit with a sudden increase in interest rates as the low interest rate will often remain constant, at least for the life of the balance.

Although you will still be paying interest on your debt, the annual percentage rate (APR) is usually well below that of a standard credit card and so this option should still save you money and, hopefully, ensure that the debt is paid off sooner.


Credit cards are a great way to spread the cost of a purchase over a period of time. This is particularly useful if you need to make an expensive purchase that you will not be able to pay off in one go as you can effectively ‘buy now and pay later’.

This sort of transaction needs to be done with a degree of caution as paying for expensive items on a credit card can lead to excessive interest charges and can lead to spiraling debt if not managed correctly.

But if you are in a position whereby you can effectively spread the cost of a large purchase over a period of time without racking up huge amounts of debt in interest payments then a credit card can give you the freedom to do this.

Furthermore, if you have a good credit history then you may be eligible for a card that offers zero per cent interest on purchases for a set amount of time and so you may even be able to spread the cost without paying a penny in interest.

Credit Build and Credit Repair

Credit cards can also be useful if you are looking to rebuild a damaged credit rating or build up a credit score if you have no previous credit history.

And there are specialized credit repair and credit builder credit cards that you may be able to take out even if you have had credit problems in the past.

You can build your credit score with these cards as long as you keep up with the monthly repayments as this will show lenders that you are a responsible customer.

The major downside to these cards is that they often have a very high  APR, often in excess of 30 per cent, so it is advisable that you don’t carry a balance over from one month to the next. In addition, credit limits are often set low on these cards so you may not be able to use a credit builder card for a major purchase.


Some lenders offer rewards to customers as an incentive to use their particular card and these can range from money off at supermarkets, air miles or even cash back.

So if you pay for your weekly grocery shop on a card that offers money off at supermarkets then you could make a saving on your shopping just for using your card. Similarly, some cards offer cash back at the end of each month so you can earn money back just by using your card.

But these cards are really only worth considering if you are confident that you will be able to pay off the balance in full at the end of each month as the interest that you will be charged on any outstanding balances will often outweigh the value of the rewards on offer.

There are credit cards on the market to meet the requirements of a variety of consumers so it is best to shop around to find the best credit card that meets your specific requirements.

And remember, you should always try to pay a credit card balance off in full at the end of each month to avoid paying interest and increasing the level of debt.

Article written by Les Roberts, credit card researcher at Moneysupermarket.com.

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{ 3 comments… read them below or add one }

Ravi Gupta

I have to agree with your article and say that credit cards can be a great tool. For example I use to have a credit card that would have no rewards. After seeing all the rewards out there I decided to go out and get a card that gave me something back. I stumbled upon the Amazon Credit Card that gave me three points for every dollar that I spend on Amazon. It’s a great way for me to save since I use prime for many things.
If you’re going to spend money you might as well get something out of it.

-Ravi G.
Ravi Gupta´s last [type] ..Ethics and Investing


Scott Messner

For credit card use to be a great tool and have advantages, the user must have a high degree of will power. Balances obviously need to be paid off monthly. Since a large percentage of credit card users are unable to do this, credit debts soon become an avenue of debt. Credit cards should be avoided if you are paying off debt.
Scott Messner´s last [type] ..Divide and Conquer your Expenses


Megan Smith

With hundreds of credit cards to choose from it is important you get the right one for your circumstances. The right choice for you depends on how you use your card. If you pay off your balance in full and on time every month you’re unlikely to be concerned about the interest rate as you won’t incur any interest charges. You should instead go for a card that rewards you with cashback for everything you spend. If you expect to use your card to get cash advances, you’ll want to look for a card that carries a lower APR and lower fees on cash advances. Some credit cards charge a higher APR for cash advances than for purchases.
Megan Smith´s last [type] ..Debt On Student Loans Becomes Heavier For Graduates


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