Find the right thing in the credit card jungle – a guide to a good credit card
The credit card can be a good thing to have for a variety of reasons. It is a tool that you can use in your everyday life to handle a variety of “situations” that can arise in your personal finances – either to manage everyday expenses or for those unexpected situations when you need cash assistance. But there are so many credit cards and many different things to keep in mind when comparing them, so finding the right one can be difficult.
We go through the most important fees, terms and benefits that you should consider when looking for credit cards
You can use a credit card for quite a few different things, as long as you only use it in a smart and responsible way. For example, you can have a credit card when you want to share the food costs with your partner by both shopping on each card and then you split the bill when it arrives at the end of the month. You can use the card as a security in case an unexpected expense arises which is difficult to afford in the regular monthly budget and so on. The list can be made quite long.
The advantage of credit cards compared to a regular loan is mainly two things. Firstly, it is a credit that is already approved and that you can use immediately when you need it. With a loan you must first apply and go through the whole process and finally get money paid out. With the credit card, everything is practical since before you have an approved credit level. Thus, you can only use the card directly when your need arises.
The other major advantage is that virtually all credit cards offer interest-free credit during the first period, which can be up to around 60 days. The idea is that at the end of the month you get a bill on everything you bought with your credit card and then you have to pay that bill within a certain number of days. If you do, you will not have to pay any interest. If you choose to postpone the payment, then comes the interest rate. It should also be said that the interest rate is quite high, so it is not great to wait.
How to choose the right credit card
Now that we have found that the credit card can be quite good to have, let’s go ahead and start thinking about what to consider when choosing a credit card. Because there are quite a few credit cards to choose from and to some extent it is easier to compare them and to some extent actually quite complicated. We will try to go through what is important to look at when making your choice.
The basic requirements are of course a little important
A first thing to consider when choosing a credit card is of course what requirements are placed on the person applying for the card. Maybe there are some requirements that you do not meet and then you can not choose that card either. So turning a small eye on this in the beginning does not hurt.
Those that can affect are, for example, age (if you are 18, some cards can go away when they require you to be at least 20), payment notes, annual income or that you are registered in Sweden. Most requirements are fairly normal and if you only have an ok economy then it should go well. Also, not all credit cards require that you do not have a payment note so if this is a problem for you then you can look at the alternatives where this is not an obvious obstacle.
Interest on credit
One of the classic things to compare is what interest rate you get if you use the credit. It can be pretty interesting. If you use your credit card smartly, you often do not have to pay interest on your credit, by repaying the amount before the interest-free days have expired.
It is not very affordable to use the credit card for larger amounts that are repaid over a longer period of time when the interest rate is clearly higher than for ordinary private loans. If you plan to use a lot of credit, a regular loan can clearly be a better option.
For this reason, I usually do not think it is super important to compare the interest rate on the credit card too closely. Most cards have about the same interest rate. What to do is to avoid those cards that have unusually high interest rates. The interest rate is usually around 10% and up to maybe 16%. If you plan to use the credit to a greater extent, choose a card in the lower part of this range.
Number of interest-free days
Something that may be a little more interesting is how many interest-free days you have on your credit card. It basically works so that when you shop on your credit card you get a bill at the end of the month and if you pay it either the same month or next month you don’t have to pay any interest. If you instead choose to postpone the payment, it becomes a normal credit for which you have to pay interest.
Almost all cards offer interest-free days and usually offer up to 44, 50, 55 or 60 days. It always says “up to” because everything depends on when you have bought the card. If you use the credit right at the beginning of the month, you have the most time. If you use it right at the end of the month before the bill has arrived, you have at least time.
If you planned to use your credit card as a way to trade on credit during the month and then always pay back the money before you get interest on the credit, the number of interest-free days is a pretty interesting thing to look at when comparing credit cards. Most credit cards have at least 44 days, but if you feel you need more time, you can choose one with 60 days.
This is of course a fairly important part when comparing, because this is where you can often see some differences and this is also where you can save a fortune if you make a good choice. There are different types of fees to take into account, from annual fees and daily fees to currency exchange surcharges for purchases or withdrawals abroad and fees for withdrawals in vending machines, etc.
When choosing a credit card, you should consider how you will use your card and what is the main purpose of the card. Try to find an alternative that suits you and that is the least expensive for that type of activity.
Annual fee – This is a concrete way to save money, by choosing a card with a low fee. There are some alternatives that have no annual fee at all but it is not super common. Most ordinary cards have an annual fee of SEK 195 but some can up to SEK 300. The difference per month is not that great within that range. Some cards may be more expensive, but they are often special cards such as Platinum variants.
Aviation fee – The notice fee is something you pay for the actual invoice you receive. Preferably, you want to avoid such a charge entirely because it is unnecessary. Many times you can get rid of the charge by choosing e-invoice, so feel free to choose this. Some lenders only have a fee if you choose to pay off a debt. The most important thing is that you do not pay this fee unnecessarily.
Currency exchange premiums abroad – Most banks / lenders have some kind of premiums for when you trade or withdraw money abroad. You get the premium when the money is exchanged from Swedish kronor to the currency that applies in the country you are visiting. Typically, the power on is between 1.5 and 2%. However, you should easily be able to find a card where you get 1.5%.
Extra Cards – This is something that you may not always think of but which can be important. An extra card means that you can get a credit card linked to the same credit and when the month is over, everything comes on the same bill. This is good if you are two who share finances and want a common credit, for example if you want to share food costs or the like.
An extra card can often cost for example SEK 100 a year or more so it can be good to look at this if you intend to buy two or more cards on the same credit. A few lenders have free extra cards and for those who want to get away cheaply, it may make sense to look at them more closely.
Withdrawal in automatic
Withdrawing money with a credit card is slightly different than withdrawing money with your regular bank card given that you usually withdraw money that you have in your account. When you withdraw money with a credit card, you actually withdraw money that you do not have. You can simply borrow. In principle, all credit cards have an automatic withdrawal fee and are quite similar. The banks usually have a percentage fee and the lowest possible fee – for example 3% but at least SEK 35. It may vary slightly but 3% is the most common. The lowest fee can also vary between SEK 35 and 45. Usually the charges are the same for withdrawals in vending machines in other countries.
There may also be some other rules and restrictions on withdrawals that may be interesting. However, these are usually not so important for the ordinary user but more in special cases. For example, there are limits to how much money you can spend in total per day or week, but the limits usually lie at SEK 15-20,000 per week or something like that, so it affects very few.
An interesting aspect of credit cards is that they often come with some insurance. The most common is travel insurance that you get if you pay as at least a certain part of the trip with your credit card. Most cards come with travel insurance. Another insurance that may be found on some cards is Fully Risk Insurance or Buyer Insurance with Extended Warranty. This is more unusual and if it is important to you you should look specifically for cards where it is included.
For travel insurance, there are, of course, slightly different conditions depending on credit cards. The terms are often similar and if you have come so far that you choose between a few credit cards to apply for, you can of course check these to compare the terms. Maybe it’s something short that has a bit more favorable terms so it can weigh in. The basic rule is, in any case, that at least 50% or at least 75% of the trip must be paid with the credit card for the insurance to apply.
Many credit cards also have extra insurance cover. You can receive compensation for deductible for a home or car up to a certain amount or compensation for disability in the event of an accident, etc. If you think these things are important, you have to look up the terms a little more carefully. Something that may be a little interesting is that some credit cards have reimbursement for deductible on rental car, which is nice when you are on vacation.
One reason for obtaining a credit card may be that you want to use the card’s bonus system. Usually you get some type of points when you buy on the card which can then be converted to something else. However, it is far from all cards that have any bonus and if they have it it rarely gives much.
The best bonus can usually be obtained via credit cards issued by either grocery stores such as ICA and Coop or petrol companies. Then you can get some discount on food or fuel if you shop on the card. It can make a difference over a longer period if you do a lot of shopping.
Check out alternatives to bonuses if you have been thinking specifically about trying to take advantage of such a thing, but I would not advise you to hang up too much on such a thing. Keep in mind that the credit card you choose should be cheap in general and have sensible fees and terms for the things you think you will use most. The bonus can easily be eaten up by these fees if you choose a worse card.
Best way to compare credit cards
Comparing credit cards is quite important, considering how many different options there are in the market and that there are so many different fees and benefits that affect how good a card actually is. So you should not just pick the first best card you see but look up the options.
Given the wide range of credit cards, it is not always easy to check and compare different options in a good way. To be able to get a clear comparison, it is best if the information is collected. We have a clear comparison of credit cards here on the site that you can use with advantage, or you can test the very comprehensive and completely objective comparison that is available on Konsumentnas.se.
If instead you feel that you want a little more help, you can try using a mediator, whose services are free of charge. There are some loan intermediaries that also allow you to compare credit cards, for example Consector.se. By following that path you do not have to do all the work yourself and can also get some personal help.
Of course it is possible to check out all the options on your own, but it takes quite a lot of time and it can be difficult to get a good overview. Utilize the tools available to save time and perhaps even money. All the pages I have just suggested will help you for free.
Summary of what is important to think about
Given that there are so many credit cards, it is always good to compare before making your choice, so that you do not risk choosing an unnecessarily expensive credit card or a card that has worse conditions. It doesn’t take long to look through the options, especially if you use a service or site that collects information about many different credit cards.
My best advice is to try to find a credit card that suits you and the way you want to use the card. Think about whether you intend to use the credit in the longer term or if you mainly want the interest-free credit and pay the bills every month. Think about whether you intend to use the card abroad or make withdrawals at vending machines and how often it is possible to do so. Consider the importance of the insurance policies included. And so on.
Some may just want the cheapest possible card and use it for small things while others may want the card as a kind of buffer for unexpected expenses or if the money runs out by the end of the month. Others may want to buy more expensive things on credit or use it on their overseas trip. If you only know what your main purpose is with the credit card, it will be much easier to choose a card that is right for you and that is optimized for your purposes.
Remember to check the annual fee, the number of interest-free days, the fees for withdrawals and for purchases and withdrawals in other countries, the cost of extra cards and all such. Usually, there is not much difference between different credit cards, but there can clearly be better and worse cards. The fact that there is a large selection makes it a little harder to get an overview, but it also makes it easier to get a card that is really adapted to one’s own needs. See it as an advantage that you can find just the right credit card for you.