Credit cards are one of the most popular personal finance products in the UK. This is not only because they offer us a quick & secure way of paying for things, but also because they have evolved to offer useful features. 0% balance transfers, 0% purchase interest, credit building functionality & numerous reward programs (like cashback, air miles and supermarket reward points) are just some of the perks credit cards offer .
Compare credit cards using our simple comparison tables or read on to learn more about credit card benefits & your options.
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In their simplest form; credit cards are simply embossed plastic cards, containing one or two electrical chips, which enable people who hold them to access lines of credit from their card issuer.
However, the simplicity of credit cards’ standard functionality belies their real value to holders. This value is derived partly through specific attributes of the account associated with the physical ‘plastic’ and partly in the legal framework in which the UK credit market has evolved.
Specific account attributes might include anything from ‘cheap’ credit, by way of 0% or low interest rate balance transfers or purchases, to rewards and benefit programs that offer holders rewards for spending on their cards.
The legal framework that credit cards exist in offers consumers a transparent and highly regulated credit market, whilst also bestowing enhanced consumer protection on certain credit card purchases.
Whilst getting the right credit card offers tremendous benefit, getting (or applying for) the wrong card can actually be a hindrance, so credit card applications should not be made lightly.
Before any application is made it is essential that you fully understand your current financial circumstances (to help avoid rejection and the subsequent issues it causes) and the product you are applying for. Take care to ensure you have not been drawn into applying for an unsuitable product by clever marketing and short term price promotions that may ultimately leave you out-of-pocket. To help you select the ‘best’ credit card (for your particular circumstances), it's worth understanding a bit about the different types of credit card that are available (or not), and which features and benefits might be particularly beneficial.
All credit cards are different (even the same product offered to two different people could vary in terms of credit limit, APR and introductory offer). Most fall into one of four main categories:
Standard credit cards, as the name implies, are the most straightforward of credit cards. They tend to be offered by banks/building societies to their bank account holders. They have traditionally been marketed as simply an alternative payment method, offering little in the way of promotional deals and rates that some other credit card types offer, although some have improved recently – offering cashback on particular purchases.
The most popular credit cards in the UK tend to be balance transfer products. Balance transfers offer customers the opportunity to transfer an existing credit card balance, held with one issuer, to another issuer at a more advantageous interest rate. More often than not, especially with 0% transfers, the interest rate is only reduced for an introductory/promotional period, after which it returns to the higher standard APR. However, some issuers also offer products which offer a fixed reduce rate of interest for the life of the balance.
Although many balance transfer cards are referred to as '0% balance transfers', they are not normally entirely free, as 0% might imply. This is because although no interest is applied to the balance once it is has been transferred, customers are usually charged a fee (balance transfer fee) to transfer the balance between issuers.
Recent developments in the once stable balance transfer market have seen issuers fight for market share by reducing the length of the 0% period and the balance transfer fee together, so customers get a shorter introductory period, but pay less in fees. These ‘low fee’ products are particularly attractive to those who are confident to pay off their balance earlier than the leading 0% periods allow for and for whom the transfer fee therefore represents the greatest expense.
0% purchase credit cards offer customers the ability to spend on their credit card without incurring interest on the accrued balance for an introductory period (assuming the minimum payments are made on time etc.).
Because these cards offer 0% on new purchases they don't tend to be suitable for people who have already built up a credit card balance. Nevertheless, they are still very popular products, appealing to:
There are numerous credit card rewards available to customers, each designed to appeal to different groups.
Airmile credit cards are one of the longest established forms of reward credit cards. They tend to be associated with particular carriers or airline groups and offer people the opportunity to earn points when they spend, which they can then exchange for flights, upgrades and other travel related benefits.
Cashback cards offer perhaps the most tangible of credit card rewards, cash. Typically issuers increase the amount of cashback for an introductory period and/or cap the total cashback a customer can earn from a given spend category (Petrol, Department Stores, Supermarket etc).
Some cashback cards also charge an annual fee to customers, so try to calculate whether the cashback you might earn would cover the cost of an annual fee and/or whether a little research into other reward credit cards might lead you to cards that offer rewards of a higher cash equivalent value than simply cash itself (e.g. cinema tickets).
Supermarket reward credit cards are offered by a number of UK supermarkets and offer enhanced reward point ‘earn rates’ for customers using them, which they can then use within the supermarkets established rewards program. Although on the face of it reward credit cards can seem very appealing, you should only consider applying for these products if you are able to clear your credit card balance every month in full. If not, the interest you are likely to accrue on your balance will far outweigh the monetary value of any rewards.
Read our guide to reward & cashback cards: [click here] for more detailed information about the different credit card reward schemes available in the UK.
If you've already had credit cards, loans or other borrowings that you have struggled to pay, you may find that you have 'bad credit' and your credit card applications are rejected. Unfortunately many exacerbate the situation with additional applications, which are usually perceived by credit card issuers as demonstrating a difficult financial position and desperation to access credit.
However, people with bad credit still need to access credit based products, so issuers have responded with 'credit cards for bad credit'. These products are designed specifically for people with troubled credit history, or people who have no credit history whatsoever.
The credit limits are lower than those offered to 'prime' customers and the interest rates (APR's) are usually much higher, to insure the issuer against the increased likelihood of bad debt or default. That said, bad credit credit cards are one of the most accessible credit products, and are often a lifeline to people wanting to rebuild their credit score so that they can demonstrate the creditworthiness required to be accepted for products involving higher levels of debt, like mortgages.
Issuers sometimes offer an indication of the available credit limits, but you won't know exactly what credit limit you'll get until after you have applied, been approved and the provider has assessed your circumstances, including; your age, credit rating and your current annual salary.
Once assessed, the issuer will offer you a credit limit, based on their belief that you can afford to service the debt.
Credit limits also vary dependent on your chosen card type. Typically different credit card types come with different limits (i.e. a platinum credit card will allow for a higher credit limit than standard credit cards, but as such require the holder to have a higher annual salary). Your credit limit may fluctuate over the time which you have the card, based on the way in which you use it, and how you manage your finances. Should your provider choose to change your credit limit (either an increase or decrease of your limit) you will be notified.
If you’re unhappy with your credit limit, you're entitled to request an increase from the provider, although it's wise to demonstrate that you are a reliable customer through positive use over a number of months, prior to requesting an increase.
Obviously loans and credit cards are completely different products, but for many people credit cards offer a better, more flexible, way of borrowing. This is partly because credit cards offer their users better consumer protection through Section 75 of the Consumer Credit Act [Read our Section 75 guide here]. However, unlike loans, credit card repayments are relatively flexible. Minimum payments must be made, but customers can choose when they repay the monies they owe, rather than having to make fixed payments month on month regardless of other outgoings.
Once you understand the different types of credit cards available, and have a good idea of what type of card would best suit your needs, the simplest way of comparing products is with product comparison tables (featured above) which rank products based on particular features.
We have developed a range of comparison tables to help you quickly compare the finer details of particular credit card attributes. If you find a suitable product, you can use the secure links found through clicking the 'more info' button to take you to the relevant page on the issuer's website.