Choosing your new credit card

When applying for a new credit card, it’s essential to know the finer points of each offer, whilst also being aware of the role your credit history plays as part of the application.

Credit limit

Your credit limit may be decided for you, but some providers give you the option of nominating an amount.

Remember that a credit limit needs to be manageable and the more you borrow, the longer it can take to pay off.  If you owe more, then the amount payable in interest can increase as well.

APR

You will usually see a representative APR, or annual percentage rate, promoted online.  This is not a guaranteed rate, it is simply a common figure given to a large number of customers.  Your individual rate can be affected by your credit history and circumstances.

Purchases

Make sure you know the rate on purchases, and this is usually the main promoted APR.  You will also see other rates which apply for balance transfers and cash withdrawal.  Look out for 0% on your purchases for an extended period of time, such as 12-15 months.

Balance transfers

You can usually transfer a balance from another card, and this is beneficial if you are getting a lower APR as a result.  If you have an amount at 29%, but can do a balance transfer at 0% on a new card, then you can save a lot of money.  A small fee usually applies, which can be around 2.5-2.9% of the balance.

Introductory offers

Always take note of introductory offers; you will usually find credit cards from various providers which offer 0% on purchases and balance transfers for a fixed period of time.

Providers

There is a range of credit card providers available, and the best way to see all the latest offers and deals is to compare credit cards.

Credit history

Your credit history is a vital part of the application process; you will not get a low-rate or 0% offer if you have a poor credit rating.  However, if you have a proven history, over the last 5 years, of paying debts and bills on time, whilst managing your finances sensibly, then you stand a much better chance.

Applications

Do not apply for every credit card under the sun!  This can be detrimental, as credit refusals may negatively affect your credit rating, making it harder to apply.  Choose carefully and don’t over-apply.

If you do have a poor credit rating, then alternatives may be offered to you as a result.  Make sure you know the APR, as it can be high in these cases.

Getting a high-interest credit card will mean you pay back much more on amounts you borrow, but on the other hand they are a good way to demonstrate an improvement in your ability to handle finances and borrowing.  Always borrow sensibly!

If you do have a good credit rating, then some of the 0% offers should be available to you, and they provide great breathing space.  Those who use credit cards wisely and enjoy low interest rates certainly get the most from the service.


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