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How to choose the right credit card for you

Choosing the right credit card for you is as important as choosing the right loan - many customers think that credit cards differ only in terms of interest rate on purchases and balances. The type of cards you apply for should reflect your individual circumstances, and what you want to use a card for - you might only want a card for consolidating outstanding debts by taking advantage of 0% balance transfer offers, or take advantage of a bonus points scheme on small purchases.

If you know what you want a credit card for, but aren't sure what sort of card you should apply for, the guide below should help point you in the right direction, depending on the sort of customer you see yourself as. Once you have read through the guide, click through to a table of results filtered to suit you. If you are the type of customer who:

(Green) makes regular purchases, always clears balance in full each month

If you intend to use your credit card for purchasing things such as fuel, food shopping trips and general household supplies, and you pay off the total balance at the end of the month without fail, then the best type of card for you would be one that comes with an interest free period and has no annual fee.

There are a number of credit cards which come with specified interest-free periods on transactions - these can be anything from 30 to 60 days, or sometimes (very rarely) more. This gives you time to shore up expenses after the purchase, so if you need to top up your card, pay for train tickets or get the groceries in before pay day, your credit card will give you the flexibility to do this.

Choosing a card with no annual fee guarantees that you won't pay any charges at all; however, if you are going to be using your card regularly, it might be worth applying for a card which comes with some form of points schemes, earning you cashback on purchases, or other bonuses such as air miles and travel. The bonuses you should accrue from purchases should outweigh the annual fee if you make enough purchases and continue to pay everything off on time, but don't be enticed by the offer of bonuses and extra cashback offers if you don't see yourself ever making a use of them.

(Amber) makes regular purchases, usually, but not always, clears balances every month

If you're the kind of person who is pretty good with balancing money and making repayments, but still want a bit more flexibility at the end of the month, then a credit card with a low standard rate is probably the best solution. This means that if you carry the odd balance over at the end of the month, then the low rate of interest means you won't be so heavily penalised when it comes to making repayments.

So if you require the freedom of spending on your card and you're usually good with clearing balances on a monthly basis but occasionally its more convenient for you to carry a small amount forward, then the best thing you can do is get the lowest rate going and not get charged as much as you would with a standard rate.

As with Green customers, choose a card with no annual fee, and if you think you'll be using your card a lot, then a cash back/reward scheme could also be advantageous, in that the benefits could compensate for any charges you incur as a result of carrying balances forward.

(Orange) makes regular purchases; rarely or never clears balances at the end of each month

If you see yourself regularly using your card for purchases and rarely or not immediately paying back debts, your best bet is a card with an introductory purchase rate or an ultra low standard rate. The introductory rate means that there will be no interest on any payments for a certain amount of time. This can be 3 months, to 12 months, anything in between or sometimes less.

If you've built up debts on an existing credit card then, you could save yourself some hassle by transferring your balance to a new card with a low balance transfer rate and a low introductory rate. It is possible to get cards which have both 0% on balance transfers and a 0% introductory rate, the ideal combination for consolidation credit card debt. Not only will you not have to pay for the cost of switching your debts to a new card, but you will be given a period of reprieve during which you can set about sorting out some kind of repayment scheme. There is of course, nothing to stop you transferring your debts again to another 0% card once the end of the introductory period looms, so if you have the time, you can keep switching and repaying small amounts, avoiding expensive repayments.

Keep an eye on introductory rates, as you'll need to change to a new card once the introductory term comes to an end, otherwise you will pay interest at a higher standard rate. Cards with a low purchase rate - which can often be as low as 0% - are useful when combined with cards which have a 0% balance transfer. This allows you to shop with one card, and then switch the outstanding balance to the other when repayments are due.

Juggling balances like this is risky - make sure you keep an eye on the time limits for any introductory rates, and make sure you cancel a card before the rate is due to expire and before you apply for a new one. Remember that credit report agencies will be mindful of how many cards you are holding at any one time, and if you are have too many cards open, you may be denied a card which can be detrimental to your credit rating.

(Red) has existing levels of credit card debt which needs to be cleared

If you have several outstanding balances on your card(s) and you are determined to shore up your debts as soon as possible, you need to assess how long it'll take you, based on how much you can spare for repayments each month.

As with any form of debt, the best thing to do is to pay back amounts that greatly exceed your minimum monthly repayments. Paying only the bare minimum will see your repayments stretch out for long periods of time, and will see you paying back for more than the amounts you initially borrowed. Pay back as much as you can afford to avoid being stung by interest rates.

In terms of what type of card you should consider applying for, those with 0% on balance transfers and 0% introductory rates are ideal in that they will temporarily freeze the interest you have to pay, giving you some breathing space with which to catch up with repayments. Ideally, once one introductory offer expires, you'll be able to transfer your balance to another new 0% introductory rate card and as a result will continue to avoid interest charges. You should be careful not to have too many cards out, as this could see you refused during the application process which will harm your credit rating, and also give you nowhere interest-free to transfer your balance to. You should automatically cancel any cards you immediately don't need in order to keep your credit rating fresh.

If your credit rating means that you can't apply for a card with a 0% rate, then settle for the next best thing; that is a card with an ultra low or low standard rate of interest for transfers. As you will want to clear debt rather than make purchases, you can ignore cards which come with any bonus schemes or low purchase rates, and concentrate solely on getting back into the black.

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