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thinkmoney's guide to credit cards

Published 8 May 2012 by

Credit cards. Many people consider them a handy, convenient way of borrowing some extra cash every now and again.

However, when it comes to getting the best credit card for your needs, knowing where to start can be a real problem. There are various types of credit card out there on the market, with each one offering different benefits that'll appeal to people looking for different things.

So, to help you choose the right credit card for you, let's take a look at what options are available.

0% purchase card

One of the downsides of borrowing money on a credit card is the interest they can accrue in a relatively short space of time.

However, a 0% purchase card, if used properly, can help you avoid the expense of added interest. As long as you make the minimum required payment every month during the introductory period, you won't pay any interest - giving you time to clear your balance in full (or at least pay a large chunk off) before any interest accrues at all.

Can be useful for: borrowers looking to make expensive, one-off purchases.

0% balance transfer card

Do you already have credit card debt outstanding? Would you like to save yourself some money in the long term? If so, getting a 0% balance transfer card could help you to repay what you owe, simplify the way you manage your credit card debts and shrink the amount you'll have to repay in total.

As long as you make the minimum payment during the promotional period, you won't be charged any interest on outstanding balances you've transferred from other credit cards - so your credit card debt won't be growing while you're repaying it.

Can be useful for: borrowers looking to replace multiple debts with just one - which could save them money and make managing their borrowing more straightforward.

It's worth noting that if you're looking for the 'best of both worlds', a transfer and purchase card could give you the benefits of a 0% purchase card and a 0% balance transfer card with a single card.

Low-rate card

If you're not confident that you'll be able to clear your monthly balance in a short space of time, a card with a low interest rate that stays low could well be a better option. In many cases, a low-rate card can work out to be less costly than many personal loans and overdrafts.

Can be useful for: people who aren't sure they could clear their balance quickly enough to make a 0% credit card the right choice.

'Bad credit' credit card

This type of card is also known as a 'credit builder card'.

If you have a damaged credit rating, whether it's because you've had money problems or because you've had to enter a professional debt solution, a 'bad credit' credit card could help you to improve your credit file in the long term.

You may still be able to get this type of card if banks have turned you down for a 'standard' credit card. Although the interest rates are usually higher, a 'bad credit' credit card could help you to improve your credit score if you use it well and pay off the balance as agreed.

Can be useful for: people looking to rebuild their credit rating.

If you would like more information on what a credit rating is, and how to begin to improve it, have a look at our guide to credit ratings.

What type of credit card is best for me?

The credit card market these days is massive. Finding the best deal for borrowing some money 'on plastic' isn't always as straightforward as we'd like - and choosing the most suitable credit card requires some thought, research and forward planning.