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By Julia Kukiewicz
Staff Writer
Tuesday, 16 September 2008
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Compare Credit Cards - A Beginners' Guide
Credit Card 101
- One Credit Card, One Job
Don’t overwork your plastic: credit cards are only designed to help you with one thing at a time.
- Credit Ratings
If you’re applying for the right card you shouldn’t need to worry too much about credit ratings and there are credit cards suitable for you even if you’re new to credit.
- Finding your Perfect Credit Card
Credit cards offer increased security and flexibility compared to debit cards. You can also use them to gain retail rewards or cashback.
 Compare credit cards
Related Personal Finance Features and News
See our other recent related news stories:
Why Every Wallet Should Contain a Bunch of Credit Cards
There is no point in being virtuous about only having one credit card, explains Sarah Wray. You're much better off having a bunch of different credit cards and using them for different purposes.
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GETTING a credit card for the first time can seem daunting but - used right – they can be perfect money saving tools, rather than the scary things you frugal dad warned you about.
Follow our simple three part guide and find the best credit card for you.
1. One Credit Card, One Job
The two irrefutable laws of credit cards that every first time credit card users should know are as follows:
- Law 1: Credit cards have problems doing more than one thing at a time.
- Law 2: They will go to great lengths to fool you into thinking that this is not the case.
For example, allocation of payment clauses often mean that you can’t settle the balance of purchases made on your credit card until you’ve paid off other balances such as interest fees and balance transfers.
These ‘trapped’ purchase balances can then sit there accruing interest.
This is not to say that if a credit card comes stuffed with more extras than Lord of the Rings you shouldn’t take it out: you just need to remember that you’re not getting Lord of the Rings you’re getting – say – Kes.
So if you get a credit card for its long 0% balance transfer deal resist the urge to spend on it: even if it also has a 0% deal on purchases.
Finally, if ‘one credit card, one job’ means that you need to get more than one credit card, don’t panic.
It’s much better to have a few credit cards used well than one used badly.
2. A word about credit ratings
Credit rating worries seem to be the worst form of credit card stress but it is usually unfounded: there are credit cards on the market suitable for most situations.
Your credit rating isn’t a fixed figure. In fact it’s a subjective assessment of risk based on the information available to the bank.
This includes your salary, ‘scores’ from other credit such as loans and mortgages (but not student loans) and any debt-related County Court Judgements.
It doesn’t include bank account fines or any problems that occurred more than six years ago.
Note, however, that good behaviour doesn’t always equal acceptance. Banks are looking for profit and that doesn’t include otherwise sound financial behaviour such as always paying off your balance at the end of the month.
Since there isn’t a standardised ‘credit rating’ your credit card application could be rejected by one bank and accepted by another but, in general, the best way to be accepted is to apply for the right credit card for you.
When you apply online most banks will be able to give you a decision straight away.
3. The Best Credit Card for You
This is the fun bit: decide which job you need your credit card to do and compare the best on the market to find your perfect partner.
1. First Credit
Use them for: Building up a good credit rating if you are new to credit or have had problems with your credit rating in the past.
Credit cards such as the Barclaycard Initial and Capital One Classic are both designed specifically for those new to credit.
They offer smaller credit limits than usual – starting at just £100 with Capital One - but used regularly and paid off at the end of the month are a simple way to establish – or re-establish - your good financial credentials.
If your financial situation is really dire, the Vanquis Visa credit card which offers abysmal interest rates but can be obtained by all but the worst credit record offenders and provides a useful first rung on the ladder to a better credit score.
Compare credit cards to rebuild a credit score
2. Debt Busting
Use them for: Paying off debts accrued on other credit cards.
If you have debts on other credit cards that are accruing interest then transferring your balance to a 0% deal or a low interest rate could save you thousands of pounds.
If you’ll be able to pay off your debts in the introductory period or you know that you’ll remember to switch your credit card before the deal ends get a 0% balance transfer credit card.
If you don’t want the hassle of switching go for a low interest rate credit card.
The best 0% balance transfer card on the market now is Capital One’s Balance Transfer and Purchase credit card – their 0% rate lasts until January 2010 (sixteen months at the time of writing).
Other long 0% deals are the Egg credit card and the Barclaycard Platinum card. Those deals last until December and November 2009 respectively (but will probably be extended at the end of each month).
The best low rate credit card is the Capital One Low Rate it offers an interest rate of 5.5% for as long as the balance transfer is on your card.
Compare credit cards for balance transfers
3. Spending
Use them for: Making purchases.
If you want to make a large purchase that will take a while to pay back take advantage of credit cards offering limited 0% rates on purchases.
Compare credit cards with 0% on purchases
If you want a credit card for purchases but you always pay off your balance at the end of the month look out for reward and cashback schemes.
Compare cash back credit cards
Top of the pile is Capital One’s Platinum card: it’s offering 0% until the 1st of November 2009. Halifax’s All in One card offers 0% on purchases for 10 months.
If you’re a big Amazon or Tesco spender consider taking advantage of their reward schemes – they’re some of the best around – and both their credit cards are also offering 0% on purchases for six months.
Finally, if you want to save when you spend on travel consider the easyJet or British Airways Premium Plus credit cards – they both offer enough initial credits to bag you a free flight.
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