Most brits won’t leave home without their good old flexible friend the Credit Card. The market is
saturated with the wide range of credit cards available that you would be forgiven for getting a
credit card and sticking with it. However the credit card market is very competitive with a very high
number of brands and incentives involved so it is important that you shop around to find the best
credit card for you and keep an eye on your credit card as regularly updating or changing your credit
card could save you money in the long term.
Credit Card History
According to the Encyclopaedia Britannica, the Credit card originated in America in the 1920s when
individual firms began issuing them to customers for purchases made at company outlets. This naturally
developed into Universal credit cards which could be used at other establishments other than those
owned by the company, the first of these being the Diner’s Club card issued in the 1950s. The American
Express Company took the credit card a step closer to product we know today by developing its Travel
and Entertainment card in 1958. With this card the company would charge cardholders an annual fee and
bill them on a periodic basis and co-operating merchants around the world would pay a service charge
to the American Express in the range of 4-7 per cent of total billings.
The credit card industry evolved to the stage when the bank would credit the account of the merchant
as sales slips are received and charge the purchases to the cardholder who pays the bank either in
total or monthly instalments with interest added. Bank of America started the first national plan
with the BankAmericard in California in 1958, it was licensed in other states from 1966 onwards and
was renamed VISA in 1976-1977. Credit was no longer limited to location and credit card holders could
make purchases anywhere in the world, the credit card as we know it was born.
What to look out for when searching for a Credit Card?
The credit card market is hugely competitive and brands will always resort to offer incentives to
make their credit card offer more appealing than others. These incentives can include air miles and
points which you can use to purchase days out for example, however most credit cards will include 0
per cent offer on purchases for a set period of time and 0 percent on balance transfers for a period of
time. When searching for a credit card you need to assess what your needs are and what the intended use
for the credit card will be because it is all too easy to fall into debt with credit cards. Make sure
you fully understand what you are signing up to and are not blinded by the incentives.
A good way of comparing credit cards is by comparing the cards APR (Annual Percentage Rate) which is
calculated over the whole year rather than on a monthly basis. This rate of interest for existing
balances negates the need for the banks to charge an annual fee to card holders. The APR was introduced
when the Consumer Credit Act was passed by an Act of Parliament in 1974. All credit cards in order to
remain compliant will state what their APR is. The APR includes important factors such as the interest
rate you must pay, how you repay the loan and the length of the loan agreement. Usually, the lower the
APR the better the deal however you should also be aware of the different types of APR.
- APR Typical - means that at the very minimum the lender expects that 66% of people applying for
this card will get this rate but the actual rate you pay will depend upon your personal
- APR Typical Variable – means the same as APR Typical but that the rate can also go up and down
during the lifetime of the product. The rate could change for a variety of reasons including
changes in Bank of England base rate and certain lenders will base it on the standard variable
rate; however you should always read the small print before you take the credit card and make
sure you know exactly what you are paying for.
If you already have a credit card and the rate is no longer the best on the market then you need
to start looking for another credit card with a good APR and offers a balance transfer capability.
This will mean that you can transfer your current credit card balance on to the new card offering a
smaller rate. Quite often they will offer an incentive period with a 0 per cent rate to lure you to
the take out the card, this means that once you have transferred your balance on to the card you won’t
be charged interest on that balance until the end of the incentive period. However, some lenders will
charge a fee to transfer the balance so you should always make sure you are aware of what this balance
transfer charge is before you take out the credit card. This can be an excellent way to lower you
potential credit card debt by minimising the interest accrued but you do need to keep track of you
credit card debt if you intend to continually move that balance from card to card.
Searching for the best credit cards has become easier as many of them are available to compare and purchase
online. You can also easily search for the card that is the best suited for your situation and keep
up to date by signing up for newsletters from price comparison websites who will keep you updated on
when a new credit card deal on the market as well as other finance deals.