How do I pick a good credit card?
Nat was discussing this with a reader at the weekend, so we thought it was time to revisit the answer to this question we sent out in April last year.
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. You can also use MoneySuperMarket or Moneyfacts to compare cards from several providers. Here’s a few good ones in 2023:
Asda Money Credit Card gives you 5% cashback at Asda for 90 days (max £50) then ongoing 1%, or 0.3% everywhere else. 25.9% representative APR.
HSBC Rewards offers 2,500 points when you join and make your first purchase (£25). 23.9% rep APR.
Barclays Avios Card has no fee and you get 5,000 air mile points if you spend £1,000 in the first three months. 28.9% APR.
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. Here are some credit cards you may not have heard of:
Bip has no late payment fees and is digital only. You can manage everything on the app. 29.9% APR.
Metro Bank credit card doesn't charge fees if you want to spend money or get cash out in most of Europe. No monthly or yearly fees. 14.9% APR.
Zopa credit card has no annual fee. It charges a missed payment fee of £12 and £3 for cash withdrawals. APR from 24.9%.
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.