How to find the best credit card for your needs

14 min Read Published: 20 Jan 2021

How to find the best credit card for your needs With a huge variety of different credit cards available, it can be difficult to work out which credit card is best suited to your needs. In this article we look at four common scenarios where people stand to benefit from choosing a particular type of card, allowing them to better manage their debts and potentially save money. These fall into the following categories:

Scenario 1:"I already have credit cards that I've racked up some debt on. I'm struggling to keep up with the repayments"

It's really easy to find yourself in the situation where you have credit card debt that is beginning to feel overwhelming. It may be that you've taken out a card because of the introductory offer and, now that offer period is over, the interest payments are too high to keep up with. You may only have been paying the minimum monthly repayments and feel like you're never going to be able to pay off the entire debt. If it is becoming financially crippling or is causing you a lot of anxiety, the first thing to do is seek some impartial free debt advice. You can find suggestions of where to go in our article "Where to get free debt advice".

If you want to escape from high interest payments and get some breathing space to pay off your debts, one option is to take out a balance transfer credit card. These cards provide you with an interest-free introductory period on existing debt that you transfer from other credit cards and store cards. The best deals give you as long as 29 months interest free (Sainsbury's Balance Transfer credit card), although these cards usually require you to pay an up-front transfer fee of up to around 4% to move the debt on to the card. There are other cards that are fee-free, but the longest interest-free periods are around 18 months (for example, the Santander Everyday credit card).

Before taking out a balance transfer credit card, consider:

  • How good is your credit rating? The deals with the longest interest-free periods typically require a very good credit score, which could exclude you from some of the prime options. However, if your credit is impaired, all is not lost - there are options available of interest-free periods of up to 9 months, including the Fluid credit card.
  • How large is the debt you need to transfer? If you have a sizeable amount to move over, the balance transfer fee is going to be a key consideration when choosing the right deal for you. However, it may be worth shouldering the fee - £80 on a £2000 transfer if the rate is 4%, for example - if it will enable you to access one of the really long interest-free deals, which will give you much longer to pay off the total debt.
  • Which providers do you have your existing debt with? As different providers are often part of the same banking group, they may not accept transfers of debts from their sister-companies. This will be clearly stated in the terms and conditions, so it is worth checking if there are any restrictions before starting the application process.
  • What is the rate after the interest-free period? It's important to note that most balance transfer cards require you to transfer the debt within a certain period after you have taken out the card - typically within 30, 60 or 90 days - which means interest is payable on any further spending on the card. You will also be liable to pay interest on the remaining balance once the introductory period has come to an end, which means it is a good idea to look at how high that rate is going to be. While you could simply transfer to another zero-rate deal when you get to that point, it is good practice to try to tackle the debt head-on rather than moving it between credit-card providers.

For the current best deals on balance-transfer cards, check out our article "Best 0% balance transfer credit card deals".

Scenario 2:"I've got some credit card debt already but I've got a couple of big purchases I need to make"

In an ideal world, if you had existing debt to pay off you would do that first before undertaking any further spending. However, it is often the case that there are other essential, bigger-ticket items you need to buy before you can commit to paying down your other borrowing. In these circumstances there are some good all-round credit cards, which offer interest-free periods on not only balance transfers but also on purchases. When used sensibly, they provide a useful tool to help you manage your repayments and spread the cost of more expensive items.

The best deals offer up to 26 months interest-free on both balance transfers and purchases, such as with the Santander All in One credit card- although it is worth noting there is a £36 annual fee payable on this card. Again, it is important to factor in whether there is a balance transfer fee payable and to consider what the interest rate is going to be once the introductory offer comes to an end. Also consider:

  • How disciplined are you with your spending? It can be really tempting during the interest-free period on purchases to start splashing out on non-essentials, particularly when you may have many months - and even years - to pay it off. However, it is not free money and you still need to be able to service the debt and, ultimately, pay it off.
  • Are there other ways to fund your purchases? Depending on the length of interest-free period and how much you need to spend, it can work out better to take out a personal loan to consolidate your existing debts and make the purchases with. This is particularly the case if it is unlikely you will be able to pay it all off in full over the interest-free period. Shop around for competitive loan rates and compare them with the corresponding credit card deals.

Scenario 3:"I need to buy some furniture for my new house but the rate on my existing card is high"

If you have a big-ticket purchase to make, it is a good idea to use a credit card as it offers you protection under section 75 of the Consumer Credit Act (read more about it in "Section 75 of the Consumer Credit Act explained - your rights and how to claim"). Moreover, it can be a useful way of spreading the cost and making it more affordable than if you had to pay the total amount upfront. It is, however, worth looking for a credit card that has a competitive deal on purchases so you don't end up paying over-the-odds on interest on the debt.

When looking at interest-free purchase credit cards, bear in mind:

  • Do you have existing credit card or store card debt? If so, an all-round card with a deal on balance transfer and purchases may better suit your needs. If you don't have much debt though, you will get a more competitive deal by looking specifically for 0% purchase card, such as those in our article "Compare the best 0% purchase credit cards" .
  • What credit limit are you likely to be offered? In many instances the card provider may not offer you the advertised credit limit, depending on your individual circumstances. This could mean the amount you are offered doesn't cover the cost of the purchases you need to make and a personal loan may be a better option.

Scenario 4:"I'm keen to make my money go further and benefit from the regular shopping I do at specific stores"

Finding a good cashback or rewards credit card is an easy way to make your money work harder. If you can find an option that matches your typical spending habits, you can quickly start earning cash paid straight into your account or, alternatively, rewards in the form of vouchers or discounts.

Some of the cards with the best offers also incur an annual fee, so it is important to work out whether you are likely to recoup this cost in the rewards you earn. Others may have components that you may be unlikely to partake in, for example exclusive access to tickets to events or travel insurance, which you may not need or have no interest in. As always, it is a good idea to shop around, keeping in mind:

  • Do you tend to do your grocery shopping at the same store? If you are a loyal shopper at Sainsbury's, Tesco, Waitrose or Marks and Spencer you can earn extra loyalty points on your normal grocery shop, as well as additional discounts and offers if you use their respective branded credit cards. In the case of Sainsbury's, you can earn extra Nectar points in store, as well as on fuel purchases and shopping at Argos stores while also enjoying points from other spending on your card with other retailers. In Waitrose, meanwhile, you can earn vouchers through food shopping as well as on purchases at John Lewis stores. In most cases there are other perks too in the form of balance transfer or purchase interest-free introductory periods.
  • Do you travel often? Some of the most valuable rewards cards in terms of monetary value are those that allow you to earn free flights and hotel stays. Most of these require a relatively high annual spend to qualify, with some of the premium cards also attracting fairly sizeable annual fees. If, however, you are a frequent flyer or tend to spend quite a lot on your credit card from month to month, it is worth enjoying the perks on offer.
  • Are you well-organised? Juggling different credit cards to make the most of cashback and rewards and introductory offers does require some planning. With these type of cards, they are only really worthwhile if you are able to pay off the balance in full each month to ensure you don't end up paying interest on the debt.

The best cards are covered in our articles "Compare the best cashback and rewards credit cards" and "Which is the best American Express credit card".

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