How to find the best credit card deals
EVERYONE seems to have a credit card these days. But how do you know which one is right, or wrong, for you? And how do you make sure it doesn’t cost you a fortune in fees and charges?
Here’s how to sift through the huge range of options out there to find the best credit card deals for your personal needs.
What is a credit card?
A credit card allows you to borrow money that you then pay back.
The amount of money you can borrow will depend on your personal financial circumstances and your credit score.
But instead of borrowing a lump of cash that then appears in your bank account ready to spend like a personal loan, a credit card is an agreement that you can access up to a maximum amount of credit if you need to.
Every month, you’ll receive a statement telling you how much of that credit you’ve used. It explains what you’ve bought or paid for recently, the total amount you owe, and the date you need to pay it back, as well as some other details.
If you pay back everything you owe by the date on your statement, the amount borrowed is free - you won’t have to pay any interest on it.
But if you borrow the money for longer, you will need to pay for the privilege. The amount you pay is calculated as a portion or percentage of the amount you’ve borrowed. That’s the interest rate.
The image that springs to mind when you think of using a credit card is a huge Clueless-style shopping blow-out on the high street.
But that’s only a small part of the story. In fact, not only can you use a credit card for a huge number of purchases, if you’re smart about it, a credit card can also help you sort out, manage and even improve your financial circumstances… But only if you use it properly.
Be warned, there are a few things you can’t use a credit card for, such as paying tax bills. And some businesses don’t accept certain types of credit cards as payment, often American Express and Diners Club, usually because it costs the business too much to deal with the transaction.
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What types of credit cards are there?
Many people use different types of credit cards to help with a range of different financial needs and situations, including:
- Interest free spending using purchase credit cards
- Fee free spending and cheaper cash withdrawals abroad with travel credit cards
- Making the most of rewards and bonuses when spending with cashback credit cards
- Getting rid of existing debts with balance transfer credit cards
- Paying off overdrafts with money transfer credit cards
Plenty offer a combination of different benefits too, like teaming up a long 0% balance transfer offer with an interest free purchase deal.
What are the most popular credit cards in the UK?
One of the most common is a card that doesn’t charge you when you buy products or services - at least not at first.
These interest-free purchase credit cards are really useful if you need to break down the cost of a big purchase into more manageable chunks. Just make sure you can pay the lot off before the interest-free period ends.
A huge number of credit card holders have a balance transfer credit card because it’s a favourite for those trying to clear old debt.
With interest-free terms as long as 35 or 36 months, these can save thousands of pounds worth of interest you might otherwise have to fork out.
Just look out for fees to transfer an existing balance, and make sure you’ve paid it all off before the interest-free period ends and charges kick in.
You can find out more about balance transfer credit cards here.
Meanwhile, an interest-free money transfer credit card might suit you if there’s a lurking, eye-wateringly expensive overdraft to deal with as you can sidestep those fees, get back into the black with your bank account and pay off the debts interest-free.
What type of credit card is best?
There’s no question that the best credit card deals are the ones that most closely match your needs.
So decide what you need it for and then search for the top credit cards of that type, such as those balance transfer or interest-free purchase cards.
But the options don’t stop there. If you’re one of those people who religiously covers their bills every month, a cashback credit card could offer you a reward for being so on top of your well-organised spending, for example.
If you’re a bit of a globetrotter, a travel credit card could save you a packet while away from Blighty, not least because they don’t usually charge you a fee for using your card abroad, unlike some bank debit cards.
They may charge you for taking cash withdrawals overseas though, and whatever currency you spent in, the debt will still need to be cleared ASAP to avoid hefty interest charges.
Here’s a handy guide to travel credit cards.
What are the pros and cons of credit cards?
If you’re careful, a credit card can help you clear debts cheaply or even for free, give you a bit of interest-free breathing space to gradually clear a big purchase, or could be a way to consolidate existing credit card debts with a balance transfer.
This kind of record of well organised, smart financial management can also give your credit score a boost.
But things can quickly go pear-shaped if payments are missed, you exceed your limit or you don’t clear the balance at the end of the month.
That’s where the APR or annual percentage rate starts really making its presence felt.
This is the cost of your borrowing and covers the interest rate plus any additional costs involved. Don’t forget there could be transfer fees on your balance transfer credit card or even an annual charge to use your cashback credit card.
Even if you’re enjoying an interest-free period, you’ll pay the APR on any missed payments. The APR is often as high as 20% and could be far higher if your credit card provider thinks you represent a financial risk.
Try to get into good payment habits whatever kind of credit card you have, especially by making more than your minimum payments and clearing the balance every month - even if yours is an interest-free credit card.
A monthly direct debit is a good, easy way to make sure that happens.
At the end of the deal period the APR will rise fast, so get the balance down to zero by the time that window closes.
In general, the further you stray from the planned use of the card, the more it will cost you.
So, try not to make lots of new purchases with a balance transfer card, for example. And don’t spend money overseas on a credit card meant to be used at home. That’s when the expensive fees and charges start adding up.
How do you get a credit card?
Before you start, make the most of eligibility checkers and soft searches (soft, because they don’t leave a ‘hard’ trace on your credit file) to see which products your application is most likely to be successful for.
Getting your hands on that useful piece of plastic then means filling out an application form on the provider’s website.
Your application will usually go through an automated process first so make sure you fill out the form carefully and honestly. Even a tiny mistake, like the spelling of a name or address, could mean a refusal.
Depending on how complicated your application, circumstances or the credit card conditions are, you may get a decision almost instantly while other applications can take much longer.
Your card should arrive a week or two after a successful application but if you’re refused you may not find out for several working days.
What is the easiest credit card to get approved for?
The stronger, or higher your credit rating and affordability the better the chance of being approved for the best credit card offers currently on the market.
A comparison site will help you narrow down the top credit cards for your circumstances, or you could go straight to the provider. After completing an eligibility check, if you find you’re pre-approved for a credit card and the APR is labelled as guaranteed you can be sure you will get the card as it is shown if you apply, pending final checks from the provider.
If the APR is labelled as representative, only 51% of applicants will get the rate and offers shown. Depending on your situation, you might find that you a’re part of the 51% of applicants who are offered the advertised deal, or you might be offered a credit card, but with a smaller interest-free window, a higher interest rate, or a lower credit limit.
You don’t have to take any of the deals offered to you at all, and you could check out a few providers, but try not to make lots of applications in a short period of time because this could severely dent your credit score.
How do I get a lower interest rate?
The best credit card deals - with the lowest rates, biggest limits, cheapest fees and longest interest-free windows - are reserved for those with top notch credit scores.
As with so many financial products and services, it’s worth keeping a close eye on your credit score and file, and doing everything you can to make sure it’s in peak condition.
If you can hang on while you take action to improve your credit score, it could pay off a little later down the line.
Don’t forget there are cards available to you if your credit score isn’t the greatest, usually with much shorter 0% deals and you will probably find your credit limit is quite low.
What happens if I apply for a credit card and get declined?
A refusal will affect your credit file and so could reduce your chances of securing financial products in the future.
Ask for the reasons for the refusal, if it isn’t made clear when you’re rejected and request a copy of your credit file. Have a good long look at where you could improve your credit score as needed.
If you still need credit don’t panic, and definitely don’t start applying elsewhere willy nilly.
Without making too many applications, consider applying for a lower credit limit next time.
Meanwhile, try to reduce the need for the card in the first place, such as paying down existing debts or saving up for that new sofa instead.
