Choosing the best credit card for you
With literally thousands to choose from, it can be daunting and not a little difficult to choose the best credit card for yourself. Lost national insurance card? You could, like many people, take the simplest route and take the card that’s issued by your own bank. It’s easy, convenient and things like notifying a change of address or other personal details can be done at the same time, under the same roof. The downside is that the high street banks generally charge the highest rates of interest on the credit cards they issue. Those that charge some of the highest rates of all are still some of the most popular. There is certainly an argument for saying that the competition is still far from perfect.
If you want to do your bit for sharpening the competition, therefore, you’ll want to shop around for the best card for you. There’s no shortage of offers and you’ll have many to choose from. Whatever your circumstances, however, it’s probably cost that will be the main determinant. Cost is mostly determined by the rate of interest applied to credit used on the card.
The three most relevant rates of interest likely to influence your decision are: the introductory rate, the standard (variable) rate and the balance transfer rate. The introductory and standard variable rates will be the most pertinent if you’re applying for a new credit card, whilst the balance transfer rate is the one you’ll be most interested in if you feel the debit balance on your existing card is costing too much and you want to switch to a cheaper line of credit.
In order to attract new customers in an increasingly competitive market, most issuers will offer an introductory rate of interest as low as zero percent for a limited period of time. Take special note of the words “limited period of time”, however. At the end of this period, the issuer’s standard variable rate is likely to apply. When it does, you’ll need to be assured that the standard variable rate is also competitive and not one of the more expensive in the field. In that event, you’ll need to be prepared to start shopping around for an alternative card, to which to transfer any outstanding debt.
The low balance transfer rate is another discounted, introductory rate with which credit card issuers seek to tempt your business. Once again, there are plenty of deals around that offer balance transfer rates of zero percent. That means that you pay no interest on a debit balance transferred from your old credit card to the new issuer. These offers are also usually good for a limited period of time (generally 6 months) and after that period the issuer’s standard variable rate kicks in. Once again, therefore, it’s important that you avoid an apparently attractive transfer balance rate of 0% only to fall for an unreasonably high standard variable rate six months down the line (unless, of course, you’re prepared to transfer the debit balance to yet another issuer when the time comes).
In order to dissuade their customers from switching to another credit card provider, some companies are now offering fixed low transfer balance rates (where the low – or zero – rate of interest payable on the transferred balance applies until the debt is paid off), or even a permanently low rate of interest (where a rate lower than the standard variable rate continues to apply to all new spending on the card also).
Transfers of debit balances between different companies at zero rates of interest are clearly quite costly to the credit card issuers. Competition demands that these are included in the armoury of providers’ offers, but they are nevertheless now beginning to charge a one-off transfer fee before the offer kicks in.