Choosing your new credit card

There are many reasons why you may need a new credit card.

It may be your first card or you may wish to reduce the amount of interest you pay each month or if you are lucky enough to pay off your balance each month you may wish to take advantage of one of the many reward cards available.

To help you choose we have compiled a set of questions and answers. One thing to consider is that you may have a need for more than one new card. For example if you have an outstanding balance and use still make purchases you should consider switching to a balance transfer card for the outstanding balance and a seperate card for the ongoing purchases. This is provided you pay off the ongoing purchases.

2. What To Ask - Standard Questions

Situation : You pay off your existing balance each month
The solution : Choose a rewards card. These will either pay you cash or may be points that can be used to purchase certain products.

Situation : You have an outstanding balance but still make ongoing purchases
The solution : Transfer the existing balance to 0% balance transfer card and at the same time get an introductory purchase offer card. This way you can allow the introductory purchase card balance to build up, while you pay off the balance transfer card. You need to be very disciplined with approach though. If you have taken up a balance transfer then try to avoid new purchases on this card as repayments are weighted towards the lower interest part of the balance.

Situation : You have a large purchase coming up
The solution : Apply for an introductory purchase card and then pay off the balance over the period of the offer, or after making the minimum payments each month you store the payments in a high interest savings account then pay off the debt in full at the end of the interest free period.

Situation : You have a poor credit history
The solution : There are some high interest cards around for people with a poor credit history. If you do obtain one of these cards then make sure you always make your repayments. This way you will slowly build up your credit rating, which will eventually make the lower interest cards available to you.

3. Can your existing card be improved?

This is an option that most people completely ignore. It is entirely possible that you may be able to negotiate a new rate on your card, especially if you have another card with a lower rate. They can only say no, so what have you got to lose.

4. Should I close my existing card

Not neccessarily is the answer. You may be able to use this card in the future for a balance transfer. Also, don't forget that you normally get around 58 days interest free credit. So you may be able to make the odd one-off purchase and spread the cost over a couple of months. Some say though that having too many old unused cards still active can affect your credit rating in that your available credit including old cards exceeds your ability to repay the potential debt.

5. And finally

Remember the golden rule. Only borrow what you can avoid to borrow. If you are careful you can make the credit cards work for you, but if the credit card companies make a lot of money out of people allowing the spending to get out of control. Don't allow yourself to be one of these people.

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