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Choosing a credit card? Features you're forgetting to consider

Although most of us shop around for credit cards, we're forgetting to look at all the features of each card

When it comes to credit cards, it’s important to shop around and choose the product that works best for you. There’s a lot of choice out there, and each card is best used in a particular financial situation.

Studies show that half of those taking out a credit card shop around first, which is great news. As the Financial Standards Authority (FSA) found in their research, the more consumers shop around and use credit cards well, the more incentive there is for lenders to provide value for money. This creates good competition– which means better choice and better deals for you.

However, the FSA also found that consumers are only focusing on one or two features when choosing – and these are often benefits and introductory offers. Only 15% of people selected APR as a feature they were comparing, compared to 24% who chose benefits. And there are features consumers are overlooking entirely, such as such as long-term interest rates, fees and charges- which could lead to unexpected costs.

Case study: Balance Transfer Cards

For example, balance transfer cards almost always have a transfer fee, which is a percentage of the amount being transferred. However, a survey by Which? found that 68% of people thought their balance transfer was free, even when showed the fee. Also, only a third of people chose the cheapest credit card for balance transfers, with another third wrongly choosing one with the lowest APR and higher transfer fee, which was three times as expensive.

Many balance transfer cards lure consumers in with 0% deals but hide the fees, leading Which? to start its Stop Sneaky Fees campaign. Remember to work out how much the fees will cost before you apply, and always make sure you repay your balance before the 0% interest period ends.

So how do you choose a credit card?

When choosing a credit card, there are three important things to consider:

  • Understand why you’re using it: If you’re going to be paying the balance in full every month, choosing a card based on rewards, not interest, is sensible. However, if you are going to be making the minimum repayments, a low APR is key. If you need a long time to pay off your debts, choose a balance transfer card with a long 0% period, and try to always choose cards with a low transfer fee.
  • Make sure you read the small print: Find out all of the fees associated with the card, such the transfer fee and any annual fee. Also, find out what the APR is after the introductory rate – even if you plan on paying off your balance before this ends, it’s good to choose a low long-term APR card just in case.
  • Choose a card you qualify for: Check your credit score, and only apply for cards you qualify for. ClearScore’s eligibility ratings  on our Offers page can help with this. Most banks also provide an eligibility check before you choose a card, which only leaves a ‘soft’ search on your credit report and doesn’t affect your score.

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