Credit card types

There are many credit cards available on the market; the following is a brief summary of the most common types:

Standard credit cards

These are the most common type of credit cards and are available from most financial institutions such as banks and building societies. These credit cards are unsecured which do not need any deposit to show you can repay the debt.

Balance transfer credit cards

Balance transfer credit cards permit consumers to transfer a high interest credit card balance onto a low interest credit card. The introductory annual percentage rate (APR) for these types of credit cards are 0% which can last up to a year and maybe longer depending on the issuer. The terms and regulations for these types of credit cards vary so please check with the issuer before hand.

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Low interest credit cards

Low interest credit cards work in two different ways: a single low fixed-rate of interest or either a low introductory APR that rises to a higher rate in the future. These types of credit cards can come in handy when large purchases are made as it will take months to pay it off and with low interest, this could be a winner. Make sure to read the terms and conditions before using a low interest credit card especially the introductory interest rate.

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Reward credit cards

Reward credit cards permit users to receive incentives when making purchases with their cards.  When every pound is charged on the credit card, it constitutes for a point. These points then can be used to cash in for a variety of rewards. Reward credit cards generally require good credit scores for approval.

Cash back credit cards

Cash back credit cards allow you to earn cash rewards for making purchases using your credit card. The more often the credit card is used for purchases the more cash rewards you receive. The amount you can earn from a cash back credit card varies but it’s in the region of 1% of the total purchases. A number of credit cards offer higher cash back percentages the more you use it; others specialise in providing higher cash back percentages depending on the type of product or the type of shop.

Cash back credit cards are best suited for people who are willing to pay off there balances every month.

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0% purchase credit cards

Credit card issuers are very eager to get consumers to sign unto their credit cards and one of the ways they do this is by offering 0% on purchases for a limited time. This started a few years ago with the introductory rates of 0% on balance transfers and now there are many issuers that charge absolutely no interest on new purchases.

Usually the time period for not charging any interest is 3 months but some issuers go up to 12 months without charging any interest on purchases.

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Bad credit credit cards

Your credit can easily go from good to bad due to not paying bills on time.  If your credit score is not very good, it does not mean that you cannot succeed in getting a credit card. Bad credit credit cards are specially designed to aid credit scores and are available to people who have previously been declined a credit card elsewhere.

To build your credit score it is advisable that a bad credit credit card be utilised and the balance be paid off fully each month. This is due to the nature of this type of card as it entails high interest rates than standard credit cards. The reason for this high interest rate is so that insurance is in place against people who fail to make repayments.

By using bad credit credit cards you greatly improve your chances of repairing your credit score but only if repayments are made on time and you keep within your credit limit.

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Prepaid credit cards

Prepaid credit cards are similar to opening a bank account and depositing money into that account. Once the money is in the account, you are issued a prepaid credit card which can be used anywhere where normal credit cards are accepted.

The advantage of a prepaid credit card is that you can spend as much as you want and you won’t get into debt. The money in the account is yours and once it’s depleted you can’t use the card until you make another deposit into the account.  It’s really the same as having a debit card which is linked to a current account.

Although prepaid credit cards do not charge fees, other charges may apply including ATM, monthly and startup fees so read the terms and conditions before applying and using your prepaid credit card.

Business credit cards

Business credit cards are accessible to any business and have most of the characteristics of a conventional credit card. These types of credit cards come with many added advantages and benefits and these include special business rewards, extra credit cards for employees, higher credit limits and expenditure management reports.
Like always, all credit cards are different and offers are always changing so please read through the terms before you apply for a business credit card.

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Student credit cards

Student credit cards are becoming popular in recent times as the cost of education is spiralling out of control. Students need to finance their living costs as well as other expenses and therefore many turn to student credit cards.

Many students have no credit history so therefore student credit cards have been introduced especially for them as it makes it difficult for them to get approved for a conventional credit card. Student credit cards are designed for students that are enrolled on four year courses in colleges and universities which will help them build a a good credit history.

In comparison to the conventional credit cards; student credit cards are slightly down graded in terms of features, rewards and other benefits. Student credit cards provide a great scope in building a good credit history and it will make it easier in the future to be eligible for better, high end credit cards.

Store credit cards

Store credit cards are very similar to conventional credit cards and are issued by high street retailers such as Sainsbury’s, Marks and Spencer, Tesco etc. Store Cards can only be used to purchase products from the store that have issued them.

At first, store cards were set up as charge cards; the full amount had to be paid off every month but now all charge cards are called store credit cards and work the same way as a normal credit card. The only disadvantage is that store cards cannot be used at other retailers.

On the other hand, store credit cards can be very rewarding if you solely shop in one particular retailer. Money off schemes and points allocated to certain products can entice consumers to buy more and therefore make them a saving.