Before reading this article it’s probably best to read our guide on different card types. Also, if you read our other guide on how credit cards make money you can improve your understanding about what makes each of these cards tick.
Firstly, there’s no such thing as ‘the best credit card’. What you need to find is the best credit card for you and your own personal situation. One person’s perfect credit card can be another’s nightmare card.
Also, there are hundreds of options when it comes to choosing a credit card and too much choice can be overwhelming.
When deciding which one is right for you, the first thing is to ask yourself “what do I need a credit card for?”. There are broadly three categories of credit card customer:
- Spenders
- Debt consolidators
- Credit builders
The answer to that question will determine which group you fall into.
If you’re a spender…
The next question is “Do you plan to make a few bigger purchases you can’t afford right now, or lots of smaller purchases in a month?”
…bigger purchases
Your best bet is a purchase card. Purchase cards allow you to spend without incurring any interest for a set “promo” period. Don’t be reckless with these, anything you spend will need to be paid back eventually and when the promo period ends, any balance will start to incur interest charges immediately.
…smaller purchases
You’ve got a couple of options here, rewards cards and simple cards. Which one is best for you kind of depends on how diligent you are. Rewards cards have tempting headline offers but can sting you with a higher APR if you don’t pay off in full each month. Simple cards on the other hand have super low APRs but don’t come with any bells or whistles, no gifts, no points.
If you’re a debt consolidator…
Lucky you, as this is the biggest section of the credit cards market and you’ll be positively spoilt for choice. The best card for you here really depends on your personal circumstances; is it a big debt? Can you afford to pay off a sizeable chunk each month?
For bigger debts you may want to look at super long Balance Transfer cards. These can have upwards of three years’ interest free period.
If your debt is smaller, “No fee” or “Low fee” cards might be your best bet. These tend to have shorter interest free periods but the market is changing all the time and it’s not not uncommon for providers to offer upwards of two years interest free on these cards.
If you’re a credit builder…
So you’re getting a credit card to help build your credit score. Smart thinking. You need to be careful with credit builder cards though as the APRs are much higher than the other card categories.
Credit builder cards are often referred to as ‘bad credit’ cards I.e cards for people with bad credit history. It should never be your aim to only have a bad credit card. With sensible management and by ensuring you don’t miss a payment, you can build your credit score to a point where the ‘prime’ credit cards (Purchase cards/Balance Transfer cards) are more within your reach.
