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What is a credit card?
Credit cards offer a convenient way of borrowing and when used properly they can provide flexibility and a range of useful benefits for the cardholder. To find top credit card deals or the best credit card for you ensure that you shop around. There are a number of different credit card types in the market all of which have different benefits and interest rates and therefore it is a good idea to compare credit cards in order to find a cheap credit card that suits your spending or saving requirements.
How does a credit card work?
In return for the above, a credit card provider will apply interest rate charges against the amount you spend, transfer or withdraw. Interest is charged on a monthly basis, with the rates being displayed under Typical APR.
How much does a credit card cost?
All banks and building societies which lend money are required by law to display the cost of borrowing. This appears as APR, which stands for annual percentage rate and is the interest rate that the credit card provider charges for purchases, balance transfers, cash advances, annual fees and other charges. The lower the APR, the cheaper it is to borrow/spend. APR stands for Annual Percentage Rate and should represent the interest rate charged over the period of a year. So if you were shown an APR of 6.9% compared to an APR of 39.9% then you would know that the APR of 6.9% was the lower interest rate and all other things being equal would be likely to represent the cheapest loan. Please remember that there may be other factors you want to take into account.
Credit card types
Below is information only and does not form part of any promotion
0% credit cards
A 0% credit card, also known as an interest free credit card does not charge interest. There is an interest free period, after which a rate of interest is applied to the outstanding balance.
Balance transfer credit cards
A balance transfer credit card allows you to transfer existing store or credit card debt to a new credit card initially with a potentially lower interest rate. It is important to look at the time period of the offer as once this ends, full interest will be charged.
Low interest credit cards
With a low interest credit card or low rate credit card, the interest charged on the outstanding balance is lower than most standard rate cards in the market. As the interest is consistently low, this would save any hassle with changing credit cards to take advantage of the changing deals on the marketplace.
These benefit those who are careful with their purchases by giving back a percentage of the card spend. Cashback varies but can be up to 5% and can be maximised by using the card for more purchases, while paying off the balance monthly.
0% purchase credit cards
A 0% purchase credit card offers an introductory rate that is interest free for new purchases for a specific term after which the standard rate applies. If you are looking for help with your cash flow then a 0% purchase credit card might do the trick but be aware that each credit card will vary on the term of the interest free period and the standard rate in which it will revert to therefore it is important that you compare these features before applying.
Bad credit credit cards
These function just like regular credit cards, but due to the perceived higher risk the applicant poses to the card issuer, they often carry a higher rate of interest, and therefore benefits may be reduced. These cards are aimed at those with a poor credit rating, CCJs or those who have claimed bankruptcy.
Gold and platinum credit cards are targeted at borrowers who earn above a certain threshold. Depending on your salary, gold and platinum credit cards offer a variety of perks such as travel insurance, overseas medical assistance and access to airport lounges. Interest rates on these cards however, may not be the most competitive therefore it is essential to pay off your balance every month to ensure you are not paying over the odds for perks that you may not even use. These cards would benefit those with a hectic schedule who can use all the perks and pay their balance in full.
Rewards credit cards
Reward credit cards are gaining in popularity as customers demand more from their finances. They often offer incentives such as air miles or loyalty points, as well as a competitive standard offering. However, assessing the basic offering of the card is vital to make sure it will be effective for you. Rewards are often very difficult to value, and so it is difficult to tell if they represent a better bargain than a cheaper card with no extra incentives.
Gold and platinum credit cards
Using your credit card abroad can often lead to high charges, so specific cards are now on the market to serve those customers who need to spend overseas. These offer a variety of benefits such as air miles, 0% commission or savings on your holiday itself.
Business credit cards
A business credit card is usually issued to corporate executives to more easily keep business expenses separate from personal charges. Many financial institutions provide this product with additional benefits for the business.