Which is the best credit card?

What to consider when applying for a credit card

Finding the best credit card is a very personal matter and only you can decide which card is best for you. Credit cards offer many advantages over above the convenience factor of buying goods and services. Look out for other card benefits such as insurance or incentive schemes.

Insurances offered by credit cards can include:

• Purchase protection - Purchases made using your credit card are insured against loss, theft or accidental damage, but claims are usually restricted to 3 months/90 days from the purchase date. There is usually both a minimum value ( around £50) and maximum value per item (£around £2,500).
• Card protection - Card protection requires a registration of all your plastic cards, and allows you to cancel them all with one phone call in the event that your wallet is lost or stolen. Most cards charge around £10 per year for this service, although a few companies provide it free of charge.
• Emergency cash/replacement card - Reassuringly, if your card is lost while abroad, replacement cards are normally offered free of charge. Emergency cash, often limited to around £1000, may also be available.

Incentive schemes that are available include:

• Travel insurance - Some gold and platinum cards offer free travel insurance. But check that these policies provide adequate cover for your needs, and that the limits and excesses are acceptable i.e. compare with the type of insurance you would normally purchase.
• Cashback schemes - These credit your account with cash (offers vary from 0.2% to 1 % of the amount you spend). For example, spending £500 per month will accrue £2.50-£5.00 per month (equivalent to £30-£60 per year) cashback. Some cards pay a higher percentage the more you spend, others add extra if you spent at certain retailers.
• Points schemes - In similarity to cashback schemes, points are earned in relation to the amount spent, and can be redeemed against a variety of goods. These schemes are beneficial to those who regularly use their credit card, as high numbers of points may be needed for substantial items. A well known example is the air miles credit card.

 

Free extended warranties - Extension from the usual 12-month, to possibly two or three years, on goods purchased, are offered by some cards.

HOWEVER...

If you don't pay off your entire balance at the end of each month, look for a card offering low interest rates and short duration of charge. This is usually more valuable than the other benefits mentioned (This depends upon your own personal circumstances).

• Rates - Some cards offer introductory interest rates for the first few months only, others offer an attractive on-going rate (important if you expect months of being unable to repay the full balance, incurring interest charges).
• Duration - The duration of interest charge may vary between different credit card companies, but it effects the total amount charged.

  For example, charge may be from the purchase date of the item (as on your receipt), from the day the amount is added to your account, or from the date that your statement was issued. Charges are likely to be much higher in the first than the last case.

• Interest on store cards - Although store cards provide credit, their interest charges on outstanding balances can be much higher than credit cards.
• Other charges
  • Rate for cash withdrawals - A cash withdrawal is often charged interest from the day of withdrawal. It may attract a higher interest rate or additional fixed charge.
  • Penalties for late payment - Be aware of any major penalties. We all make mistakes and overlook bills from time to time.
  • Annual fee - Some cards always charge an annual fee, and others only if you spend less than a specified amount (around £1500) on your card during the year.