Credit card features

When you are choosing a credit card, shop around and compare the following features:

  • APR – This is a measure of the cost of the credit, which is expressed in a yearly percentage rate. Make sure that you check the periodic rate for each card. This is the rate of interest which is added to any balance which is outstanding on your account, and decides what the finance charge for each billing phase (i.e. monthly) will be. For example, if you had an outstanding balance of £2000 with a 18.5% interest rate and a low minimum monthly payment, this would take 11 years to pay off and you would also have to pay £1934 in interest, which nearly doubles the original charge.
  • Grace period – This refers to the period between when the purchase is made and when you start being charged interest on the balance. If the credit card you choose has a standard grace period, then you will usually avoid any finance charges if you pay the balance in full each month. Some credit cards offer the incentive of a grace period when a new credit card is issued, even if the full balance is not cleared each month. However, if the card does not offer any grace period, interest will be applied from when the first transaction is made.
  • Annual fees – It can be a great disadvantage to have a card which charges you each month to own the card, especially if you may not be using the card each month.
  • Transaction fees – Some credit card issuers will charge you when you get a cash advance, exceed your credit limit or if you are unable to make the payment on time. Some issuers also charge you a flat rate each month, regardless of whether you have used the card or not.
  • Customer service – If you lose your card or want to make any changes on it, then it is essential that you have access to good customer service. This will usually be over the phone, so make sure that the provider you choose has a 24-hour help line, and that you can speak to a person rather than it being automated.
  • Member benefits – These include online account access (enabling you to pay your bills or manage your account online) and unauthorised spending protection. The range of extras will depend on the company you select.