Credit Cards For All Occasions
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Despite the headline, I think people should think twice (or more) before getting a credit card. Useful tools as they may be, the temptation is often to ratchet up debts or to make silly, extravagant purchases. That's all fine if you're not paying any fees or interest, but if it gets out of hand you'll end up paying perhaps 16% interest per year.
But, should you need to borrow, you need to service your debt as cheaply as possible. And credit cards, when used correctly, can be the best way to do this.
There are three unusual credit cards on the market at the moment that, between them, cover almost all scenarios: whether you want to do a balance transfer, make purchases, or both.
The cards are: the new Abbey Zero credit card, the HSBC credit card and the Capital One Platinum credit card.
Good for balance transfers
Two of these three cards are good for balance transfers.
First up is the Abbey Zero credit card, which has a 0% deal for six months. Nothing special, you'd say, but it also doesn't charge a balance-transfer fee. It's been some time since a deal lasting greater than five months didn't include a fee.
The HSBC credit card's unique offering is 2.9% APR (the annual interest rate) for two years with a 2.5% fee.
Fees can be misleading, because these one-off charges on the whole balance right at the start of the deal equates to higher APRs.
So, to try to make this easier to compare, if you transfer a balance to this HSBC card and pay it off in equal instalments over the two-year deal, it'll be the equivalent of paying no fee and being charged roughly 5.5% APR. This is not as cheap as Abbey's 0% deal (obviously!) but it's still very cheap, and it's more useful if it's going to take you a while to repay your debt.
Good for purchases
The same HSBC card turns up again in the 'good for purchases' section. It has a 0% interest deal for 12 months on purchases (with no fee, which is normal for purchases deals). This is as long a deal as you can get at the moment.
In fact, there are just two other cards that offer purchase deals for that long: the Capital One Platinum card and the First Direct Gold Card.
It's very important that you don't use your HSBC card (or the First Direct card) for both balance transfers and purchases, because you will be penalised. You can read more about it in 99% Of Credit Cards Use This Dire Trick.
But, if you want to know what cards are good for both purchases and balance transfers:
Good for purchases and balance transfers
Both the Abbey Zero card and Capital One Platinum card are the best choices if you want to do both. The reason for this is that they offer 0% introductory deals of equal length on both transfers and purchases. That's how they escape the penalty mentioned in 99% Of Credit Cards Use This Dire Trick.
Abbey's card, therefore, offers a 0% deal for six months on both balance transfers and purchases. Although it's a relatively short deal, it's perfect for people who can repay their debt in that time because there is no fee on the transfer, as I mentioned earlier.
Whilst Capital One does charge a 3% fee on balance transfers, it offers 0% interest for a whole year on both transfers and purchases, making this card perfect for someone who needs longer to pay off new purchases and balance transfers.
Those are the cream of the credit cards, at the moment. Although I quite like cashback cards myself, because I pay off my credit-card bill every month!
> Compare more credit cards through The Fool.
