It would be fair to say that our lives would be pretty much impossible without comparison; yes, I know that it is commonly believed we make decisions and act on the basis of fact but it is not true – we decide and act on the basis of our judgement and judgement is always a matter of comparison. Credit card comparison is no exception and it gives us the opportunity to form judgment and make informed choices. So far, so good!
But with the immense competition on the credit cards market and the fact that our time is by default limited I started thinking about the conditions under which conducting searches, using technology and informing your judgment about credits cards is really worth it. And please note, that I have finally graduated from ‘credit card bashing’ to ‘credit cards are a useful financial instrument when used properly’. So should you!
To set out the condition that make spending time on credit card comparison worth it, I started thinking that what matters is whether you use your cards as a short term facility and pay them off every month; whether you use these as medium term borrowing facility; or you let them slide far into your future and accept credit card debt as you lifelong companion.
Short term use
In this case you use your credit cards as a short term facility and pay the balance off every month. This has two main advantages: a) you delay payment on purchases and b) at the same time you pay no interest on the borrowing.
At first, I was going to say that in this case credit card comparison is not worth it; then realised that this is not entirely correct. What needs comparing, however, is only, or mainly, the length of time of free borrowing. I have cards on which the length of interest free borrowing can vary by as much as three week. This looks like a small gain but you know that I believe in the great power of ‘small’. Worth a try but if you can’t be bothered don’t fret – time consuming comparison is not a must.
Credit cards as a lifelong companion
I don’t even want to go there because this blog is about making people think; not about patronising and chastising them. But…
Keeping balances on your credit cards long term is so expensive and wasteful that any further investment of time is entirely unjustified.
In other words, if your credit card debt is your lifelong companion you may as well not bother with any kind of credit card comparison – you will be choosing between the ‘rock and the hard place’. Use your time better and go play on your play station or something!
Medium term use
This is where things really start to get interesting. Using credit cards in the medium term means that they are being used as a facility for short term borrowing; this in turn means that you are paying the cards down! And the faster and more parsimoniously you do this, the better for your finances.
When using credit cards as a medium term borrowing facility it is really worth it doing extensive credit card comparison. Depending on your situation you may be looking for 0% balance transfer or 0% on new purchases. Still, I believe, in terms of comparison one should look at the following:
- Representative APR;
- Length of deal;
- Transfer fee on 0% balance transfers.
Playing this right can save quite a bit; but remember that in many cases the transfer fee can be as much as the saved interest and don’t fall for duds. Also, when going for cards with lower APR keep in mind that this can usually be changed at any point after getting the credit cards; read the small print.
Finally, credit card comparison can be useful in a fairly limited way when cards are used short term; this is pretty useless when credit card debt is seen as long term; and comparison is a very useful tool when credit cards are used as a facility for short term borrowing – this is when intelligent comparison can save us loads of cash.