How can I pick a good credit card?
The odds are stacked against women when it comes to economic equality and financial empowerment. And it doesn't help that financial institutions largely exclude women. The whole system needs an overhaul, but in the meantime we want to answer your money, finance and economics questions. Every week we'll answer one of your questions in a useful and straightforward way. Today's question is...
How can I pick a good credit card?
These days there are so many options for a credit card that it can be tempting to just go with the first bank you see on the high street or the first bank you got an account with, without doing much research.
But you could be losing out.
Taking advantage of credit cards can be an art – just ask the people in this CNBC story, who have more points than they know what to do with. Of course, not everyone has the time or desire to rack up a million reward points, but you can at least choose one that will give you some benefits.
Start by thinking about why you want a credit card. Is it to pay bills, or to use on big items so you can spread the cost, or is it just because you need it for your credit score?
With credit cards you can either pay your balance in full every month or spread repayments over a period. If you’re in the first camp you can take advantage of what’s called an interest free period – that means you won’t be charged any interest if you pay at a certain time.
If you’re going to be spreading payments out, then you’ll want to go with a card that has a lower interest rate.
If you have bad credit or no credit score, you can use a credit builder card to increase your score. With these cards you get a low credit limit and if you pay the balance off at the end of each month, you can increase your credit score.
You should also check the annual percentage rate, or APR, which is the cost of borrowing if you don’t pay off the full balance each month. The typical APR in the UK is 21.46%, but rates can vary from 5% to more than 30%. So if the APR is 21.46% and you carry over a balance of £1,000 (this is what you haven't paid off), it means you will owe £214.6 in interest by the end of that year.
Some banks will charge you an annual fee for the card – like American Express – so it’s useful to compare these fees and also see if there are any additional charges.
If you’d like to use your card abroad you should double check the fees for that as well, because some can be really expensive. There are special cards for frequent travellers you can get.
It’s also worth mentioning the dangers of credit cards. Getting into debt is easily done because that is what they’re set up for, and how the providers make money. Individual debt helps power a capitalist economy that is largely detrimental to women, and women are often most targeted as consumers.
Now to the fun part: rewards!
Rewards credit cards can give you anything from air miles to shopping discounts whenever you use them. Expert Reviews is a good place to go to compare such things and they’ve put together a handy list of the best reward credit cards for 2022.
American Express Platinum Cashback Everyday: Best no-fee cashback card
American Express Platinum Cashback: Best card for maximum cashback
Amazon Platinum: Best for regular Amazon shoppers
Santander All in One: Best for interest-free shopping and balance transfers
American Express Preferred Rewards Gold Credit: Best for rewards
Sainsbury’s Bank Nectar: Best no-fee card for shopping rewards
If this seems like a lot of information to look up, don’t worry. That’s why comparison sites exist. You can use MoneySuperMarket or Moneyfacts that make it easier to compare cards from several providers.
If you’re tired of your old-school bank and none of the rewards appeal to you, like many areas of finance this is also ripe for disruption. New credit card startup Yonder has just launched and is targeting professional millennials and will offer experience-based rewards – like free dinners to tickets to Sofar Sounds events. You can read more about it in this Sifted article.
P.S. When the first credit card was launched in the UK in 1966 it was mostly used by men and women needed a man to co-sign for them, even if they had higher earnings. Money and control of finances has long been one of the ways men have exerted control over their wives, daughters and sisters. Although we have come a long way since the Equal Credit Opportunity Act of 1974, the financial freedom of women is not absolute and many still suffer financial abuse.
About us
Selin and Nat are financial journalists who met working together at a publication in London. If you are ever worried a question you have might sound stupid, we ask each other such questions all the time.
Got a question to ask? Send it to selinandnat@gmail.com and we'll try to answer it in an upcoming newsletter. All questions are anonymous. Follow us on Instagram @rebalancing_act.
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