How to Choose a Credit Card

Want to get a credit card but don’t know where to start? Read our guide to find out how to choose the credit card that’s right for you.

Caroline Ramsey, Kristina Fox Last updated on 24 February 2022.
How to Choose a Credit Card

Choosing a credit card can seem daunting. But you can narrow down your choice by thinking about what features are most important to you.

It’s important to do your research thoroughly before you apply for a credit card. Below, we suggest six steps to help find the credit card most suited to your needs.

Think: Why do you need a credit card?

Credit cards have a number of different uses. You may want a credit card to:

  • spread the cost of a large purchase
  • manage existing credit card debt
  • build your credit score

You should think about why you need a credit card before you start looking. Credit cards are designed for different purposes, so knowing what you’ll use one for will help you choose one tailored to your needs.

It is also important to remember that you risk getting into debt if you do not pay off your credit card in full each month. You should take this into consideration when choosing a credit card, and only plan to borrow what you can afford to repay.

Common types of credit cards include:

Once you know what kind of credit card may fit your needs, you can start looking at them in more detail.

Know your credit score

Your credit score can have an impact on the credit cards you are likely to be accepted for. Generally, a higher credit score means your application is more likely to be approved by a lender. You may also be able to get better terms, such as higher credit limits and lower interest rates.

You may want to improve your credit score before applying for a credit card to increase the range of cards you are eligible for. Registering to vote and checking your credit report for errors are just two actions with the potential to boost your credit score.

You may also be able to use a credit card to build your credit score. Some providers offer ‘credit building credit cards’ specifically for people whose poor credit history may prevent them being accepted for standard credit cards.

If you have no credit history at all – if you are young or you recently moved to the UK, for example – a credit building credit card may also help you to show lenders you can be trusted to borrow money.

» MORE: How to check your credit score

The key with any credit card is to pay back at least the minimum amount each month, with the aim to pay back more if possible. Consistently making repayments on time or paying your credit card off in full will show the lender that you can manage what you borrow, which can help increase your credit score.

Check the interest rate

Interest rates vary between credit cards. Generally, the higher the interest rate, the more expensive it is for you to borrow money.

When comparing credit cards, you should look at the representative APR (annual percentage rate) as well as the interest rates offered.

The representative APR shows you how much it will cost to borrow a given amount over a year, taking into account the interest rate as well as the credit card’s annual fees, if it has any (though it won’t include additional fees such as those for balance transfers or late payments). This can help you to compare cards on a like-for-like basis.

As a rule, the lower the APR, the cheaper it will be for you to borrow.

» MORE: All you need to know about APR

It is important to remember that representative APR isn’t tailored to your specific circumstances and only 51% of successful applicants are expected to get this rate; the remaining 49% can be charged more than this.

As a result, the actual APR you are offered by a lender could be higher, depending on your credit score and individual circumstances. When you check your eligibility for a credit card, you can see the APR that you qualify for but, again, it isn’t guaranteed.

Some providers will offer credit cards with a lower interest rate, or even a 0% interest rate, for a limited period. But make sure you know when this introductory rate ends and what interest rate would then apply.

After the introductory period has ended, you will revert to the card’s standard APR. This means you may have to pay much more interest on the amount you’ve borrowed. If you do choose a 0% interest credit card, check you can afford to clear your balance before the 0% rate expires to avoid paying any interest.

Watch out for fees

Some credit cards charge an annual fee. You may be able to find a different deal that matches your needs that doesn’t charge you just for having the credit card.

Other common credit card fees include:

  • late payment fees
  • balance transfer fees
  • cash withdrawal fees
  • foreign transaction fees
  • fees for going over your credit limit

These fees can vary between providers, so it is a good idea to check the details of each card thoroughly before making a decision.

Some cards are designed for balance transfers or more tailored towards foreign transactions, so won’t charge a fee for these services. If you want a credit card for either of these reasons, it’s worth searching for a 0% balance transfer or travel credit card to avoid unnecessary charges.

» MORE: How to manage your credit limit

Look out for rewards

Rewards credit cards can give you benefits when you spend, such as cashback on your purchases or points to use to pay for flights. Certain credit cards also offer an initial reward when you sign up and start using your card.

You may also consider store credit cards. Rewards with these cards are often tailored to the store, such as bonus loyalty points for spending money on your card on its website or in store.

So if you’re a frequent flyer or often shop at a particular store, then the perks of a reward credit card might be useful.

That said, you should think about the rewards offered and consider whether you are likely to use them. If you would need to change your spending habits significantly to see any benefit from the rewards offered, then a reward credit card may not be the best choice for you.

Check your eligibility

Credit cards, like many financial products, are subject to eligibility criteria. Providers will check your credit history and assess whether to accept your application.

When you apply, the lender will search your credit record and carry out a hard credit check. This will be logged on your credit report and could impact your credit rating, so make sure you only apply for a card when you’ve found one that matches your circumstances.

Some providers allow you to check your eligibility for free before you apply. This way you can see which cards you may qualify for before you apply, without affecting your credit score.

Eligibility checkers may need the following information about you:

  • home address over the last three years
  • employment status
  • salary
  • other income you receive
  • any spending commitments

Check your eligibility and compare credit cards to find a card that suits you.

Image source: Getty Images

About the authors:

Caroline Ramsey is a content creator who specialises in personal finance. More than a decade of working in editorial teams, she offers highly tailored content covering a number of topics. Read more

Kristina is a writer at NerdWallet. A recent graduate trading French for finance, she has experience creating content for student newspaper Cherwell and an edtech company. Read more

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