Finance > Credit Cards
Types of Credit Card
There are many types of credit card, each with its own use cases and benefits, so it’s important to pick one best suited to your requirements.
In This Article
Main Types of Credit Card
- Rewards Cards
When you spend on the card, you’ll be given a reward. The reward can come in the form of cashback, air miles, loyalty points etc. Ideally, try to find a card whose rewards will replace current expenses, for example, loyalty points at a shop you frequently visit or air miles for an airline you use when going on holiday.
- Balance Transfer Cards
These cards allow you to transfer debt from existing credit cards onto a new card with a lower or even 0% interest rate for an agreed time period. Therefore, this gives you the opportunity to pay off your debt whilst worrying less about the interest you’re accruing. Having said this, the interest rate is likely to be very high following the agreed low-interest rate period. In addition, some cards may also come with a one-off fee based on the amount of debt.
- 0% Purchase Cards
Cards that come with a 0% interest rate for an agreed time period. These are ideal if you’re looking to make a large purchase and won’t be able to pay off the statement balance in full before the due date. You can spread your repayments over the 0% interest rate period. With this being said, be sure to pay it back before the 0% interest rate period ends to avoid high rates.
- Balance Transfer and Purchase Cards
These cards enable you to get the benefit of a balance transfer card, whereby you can transfer existing credit card debt onto the card, as well as use the card for purchases.
- Credit Building Cards
Designed for those with a limited or poor borrowing history – these cards act as a platform to showcase yourself as a reliable borrower. The cards will typically have a lower credit limit, which you can use to make smaller purchases. Make your repayments in full and on time, you’ll prove yourself as a trustworthy borrower, and your credit score will likely improve.
- Travel Credit Cards
These are designed for overseas spending and will likely provide better exchange rates than other cards.
- Money Transfer Cards
These allow you to transfer money from your credit card into your current account. This could be used to pay off outstanding bank debt, e.g. overdrafts. You will usually be charged a fee on the amount transferred, however this is generally followed by a period of low or 0% interest. Therefore, when taking into account fees and interest rates, you may find that money transfer cards have a lower cost of borrowing than your existing debt.
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