Choosing the right credit card

To get as much as possible out of your credit card you need to decide whether it's actually the best possible fit for the purpose which you intend to use the credit card for. It's unbelievable how many people use a credit card that doesn't fit their purpose and with their spending and repayment habits.

As a result of this you'll end up paying more than you need to for the privilege. A credit card can be very useful if you can make it work for you and get as much out of it as you can. Credit card issuers can sometimes change their terms and conditions as a way to claw back interest in other ways, its important to make sure you always read the terms and conditions and understand them which can be easier said than done. The way to try and avoid such tactics is to make use of a different credit card for each different purpose, that way you'll be sure of getting the most from your credit cards. Which credit card is best for your own needs? The compare credit cards guide below based on some common spending and repayment habits may just help you to decide which is the better option.

Regular spender (the balance is cleared in full each month)

This credit card will often be used for card purchases - sometimes it could be the food shopping or maybe getting your car filled up at the petrol station - but the debt will be cleared totally and on time each and every month. The credit card interest rate charged by the provider in these instances is not particularly relevant unless of course there's no real interest-free period. Many credit cards offer an interest-free period from the date of the transaction, this gives you at least some time before your credit card payment is due. It is best to choose a credit card without an annual fee, and if regularly spending on the credit card you may well like to earn a reward for your spending or maybe cash back. Reward schemes and Cashback levels can vary grealty between credit cards. One of the better ways to ensure you'll always clear your outstanding credit card balance is to set-up a direct debit for the full amount payable each month. This will ensure that you don't pay any interest on revolving balances.

Regular spender (balance usually cleared in full each month)

This is for someone that likes spending on their credit card and are very good at clearing the balance off from month-to-month, but now and again might choose to carry a balance forward on to the next month or statement. This won't hurt quite as much if you have made some preperation in advance by catering for this. In this specific situation it would make sense to choose a credit card that offers a low standard rate (this will mean that the interest charges for those months when it is applied aren't too heavy). Try and choose a credit card that has no annual fee, and a credit card with a reward or cash back scheme. Although these schemes are not always available on the credit cards with the lowest rates.

Regular spender (balance rarely or maybe never cleared totally each month)

If you're using your credit card regularly and perhaps rarely or maybe never repay the balance in full, your best choice of credit card may be with an introductory purchase rate or a low standard rate. Choosing a credit card with a lower standard rate will help to save you money if you are not prepared to take time to shop around when the introductory rate period expires on the credit card. If you have perhaps built up a balance on your existing credit card then it's time to consider changing to a credit card that also offers a special or low balance transfer rate. There are plenty of credit cards offering a low introductory rate in conjunction with a low balance transfer rate, The duration of the credit card introductory offer will always vary so it is therefore worth comparing different credit cards and credit card deals. Depending on the credit card introductory offers separate credit cards for your purchases and balance transfers might be the best way to go. If you do go for an introductory rate then you'll need to change to a new low rate credit card once that introductory credit card deal ends. If you don't do this you may end up paying credit card interest at a higher standard rate. There are some credit card deals with much longer-term balance transfer rates. If you think you may be slower to get it switched to another lower introductory rate on another credit card then this might possibly be a cheaper option.

Existing Credit Card debt (which you're determined to clear)

If you are totally determined to clear your outstanding credit card balance then you need to assess how long this will take you. If you were to only cover the minimum credit card payment amount each month, your debt could potentially take many years to pay off as you would potentially be repaying not much more than the monthly interest charges. If you can pay off a larger amount of the credit card debt on a regular/monthly basis you would be clearing capital as well as the interest being charged. This would mean that your credit card debt would be reduced quicker. It is very important to find the best credit card that would help you to save the most money. Try switching to a great introductory rate, this really does make more sense as all the repayments made during this period would help reduce the capital outstanding on the credit card, therefore the outstanding credit card balance will be much lower at the end of the introductory period. Ideally, once one introductory or promotional offer expires you could transfer your outstanding balance to a new credit card and as a result could continue to avoid the interest charges.

Credit Card - Cash Withdrawals

Withdrawing some cash on your credit cards is never recommended. This is generally very expensive and can also incur some added credit card fees. You really need to make sure that you know the terms and conditions of your credit card and any applicable rates and fees before taking cash out on your credit card. Generally you would be charged from the date of the withdrawal (which would mean that there is no interest-free period).You could also be hit by a set fee or percentage of the amount withdrawn from your card, just for withdrawing cash. Sometimes credit card issuers do offer promotional rates or introductory rates on cash advances, sometimes as low as 0%, although consideration should also be paid to cash advance fees and conditions.

Using Your Credit Card Abroad

If you like to use the credit card when travelling or going on your holidays then you need to make sure that you know how much it's costing you to use it overseas. Most credit cards have additional charges when they are used abroad, not many people know this. Credit card exchange rates are based on the Visa and MasterCard wholesale rates, with an additional percentage added by the card issuers. This can vary from 0% to 2.75% depending on which credit card it is. The actual rate applied may vary between countries so you need to be aware of it before you travel and use your credit card abroad. The charges can be applied to withdrawals made at foreign ATMs as well as when your crerdit card is used to pay for goods and services. As it's an exchange rate it's in addition to the set fees in place for withdrawing the cash, and you'll pay interest at the standard or introductory rate for both cash withdrawals and purchases. When selecting a credit card for use abroad it's also worth paying some consideration to the other facilities on offer, such as the provision of a replacement credit card in the event of the loss or theft of your own. Extra benefits may include an international assistance package and insurance for flight delay, lost and delayed luggage and personal injury.

To compare credit cards and some of the best credit card balance transfers deals click here.

For further advice check out our low rate credit card guide.