Credit Card Comparison

Credit cards all have different options, which is why a credit card comparison is vitally important before you apply for a card. We are going to look at two of the types of credit cards you can find in the UK. The first credit card has an annual fee and the second will not.

An annual fee is charged to your credit card on the anniversary date of opening the credit card account. The annual fee can vary from credit card to credit card. Basically American Express may offer 79 pounds as an annual fee and HSBC has an annual fee of 99 pounds. Mind you, these are examples and don’t reflect the actual fees or companies. The annual fee can work in two ways. Sometimes if you have an annual fee you don’t have an interest rate. There is an American Express business card with a deal where you pay a higher fee, but no interest. This type of card is not typical. Most typically if you have an annual fee you are still paying the average or typical annual percentage rate. The annual percentage rate on most cards is between 14.99 and 17.99 percent at the moment, if you have good to excellent credit.

The second credit card type does not have an annual fee. They are free of charge, but carry the same type of interest rate. They can sometimes have a higher interest rate than those with fees. Already you should be seeing something develop between the comparisons of the two types of cards. One card seems like it does not charge as much as the other. Now let’s take a look at the reason an annual fee may be charged.

When credit cards were first being offered the annual fee was to offer an “exclusive” membership in which you got air miles, cash back, or other rewards. You paid the fee, got more from the card, and the other credit cards with no fee did not have the rewards. Now almost every credit card has some type of reward whether it is air miles or charity donations and the fee is not as important. The annual fee for a few credit cards offers you a better discount or point system. For example, one company offers an annual fee card and a no annual fee card. The no annual fee card offers 1 percent cash back rewards on certain purchases. The annual fee credit card gets 5 percent cash back on the same types of purchases. Here is where the math will come in. You need to know if 5 percent cash back is enough to outweigh the annual fee or if the annual fee makes the cash back rewards the same as or less than the 1 percent with no fee.

By comparing the credit cards, their options, and their fees you can determine what card will give you the better deal. Even if one card appears better than the other it may not always be true.

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