6.5 Choosing which credit card to use

If you have several credit cards, and choose to use this method of payment to make a purchase, you will need to decide which of your cards you are going to use.

There are several things to consider, but the most obvious will likely be how much credit you have available on each of your credit cards.

If you have more than one credit card and have to make a purchase, the first thing you should bear in mind is how much credit is available on each of the cards. It wouldn’t be wise to make a purchase on a card if you didn’t have enough credit available on it to cover the cost of the transaction because you will be fined a penalty charge for going over your credit limit.

The next thing you might want to consider is what you currently use your credit card for. If, for example, you only have one credit card and are currently making use of a 0% balance transfer offer on that card, it may not be the best card to use for purchases.

This is because the majority of credit card providers will use any repayments you make to pay off the cheapest debt first, which in this case would be the interest free balance transfer offer. As a result, your purchases balance would be left accruing interest at your standard purchase APR until paid off in full, after you have paid off your balance transfer debt.

However, if you have a 0% purchases offer of equal length to the 0% balance transfer offer, you shouldn’t be faced with this problem.

If, on the other hand, you have a 0% balance transfer offer of 12 months and an interest free purchase offer of 6 months, don’t be fooled into thinking that you could transfer a balance over to your card, then make some purchases on it over 6 months and then pay off the purchase amount just after your 0% purchase deal expires.

Say you transferred a balance of £1,000 onto the above credit card and then purchased goods to a value of £500 during the 0% on purchases period. Then let’s say that after the 0% deal on purchases ends you decided to make a payment of £500 to pay off the purchases debt you have accumulated. This £500 would reduce the cheapest debt first and would therefore go towards the £1,000 you balance transferred leaving £500 of your balance transferred amount charged at 0% interest and £500 of your purchases balance charged at your standard interest rate of around 15%.

The moral of this story is that you may be better off with one credit card solely for your balance transfers and one credit card which you use just for making new purchases.

Another thing to consider when choosing which credit card to use would be the APR you are currently paying on each card. Ideally you want to use the credit card which charges you the lowest interest rate possible and has the longest interest-free period. It would not make great sense to use a credit card with a purchase APR of 15.9% to buy something if you have another card in your possession with a 9 month 0% on purchases offer (providing neither card has a balance transfer on it).

Also, you may want to bear in mind any rewards or cash back that come with each of your cards. Some credit cards offer reward points, which can be redeemed against certain gifts and services, or cash back, as a percentage of how much you spend on the card, as an incentive for customers. Now, if you have two credit cards and one offers a reward or cash back, assuming everything else is equal, you would probably be better off using the reward card because you would stand to gain more this way.

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