5 Types of Credit Card
There are now many types of
credit cards on the market as lenders compete to offer the best deals in order to entice customers in. Millions of people in the UK have at least one credit card, but surprisingly few people actually know much about the various types of card on offer. This article looks at five different types of popular credit card in order to give you a better idea of what’s out there and some of the key features of each one.
Interest Free Credit Cards
One of the most popular types of credit card around is the interest free card. Interest free credit cards effectively do what their name suggests. You are probably aware that most credit cards will charge you interest on your purchases if you do not pay off your balance in full each month. This interest is charged at what is known as the annual percentage rate, or APR for short.
With
interest free credit cards, however, you can make purchases on your card without being charged interest. This means that the cards can be useful for people looking to spread out their payments over a period of time, as it means they will be able to do so without accruing interest. This can help people to pay off what they owe on their credit cards faster than they otherwise would.
Interest free credit cards tend to be time-limited, so after a certain period the normal APR would apply. This is why it is important that you always look at the APR when applying for a credit card, no matter what the other benefits on offer.
0% Balance Transfer Cards
Also really popular are 0% balance transfer cards. Again, these do exactly what their name suggests: they allow you to transfer the balance of other credit cards over to them without having to pay interest on what you transfer over. This means that the only charge you will normally have to pay is the processing or administration fee.
0% balance transfer cards are a good way of consolidating what you owe onto a single card and, as the transferred balance is interest free, it means that people can often pay it off quicker than they have done otherwise. One thing that is important to remember, though, is that purchases made at the higher rate of interest (normally the APR) are required to be paid off first before the interest free transferred balance is paid off. This is to keep down the amount of interest you pay overall.
Air Miles Cards
As well as cards that offer
0% balance transfers and interest free purchases, you can also get cards that offer other kinds of benefits. Air miles credit cards are a popular option here: these operate as a normal credit card and, for every pound you spend on your card, you will be rewarded with air miles.
These air miles then build up as you spend on your card and once you have got enough, you will be able to redeem them for a range of benefits. This can include things such as seat upgrades, combined cash and air miles flights, entire flights and alternative trips such as spa days. This makes air miles credit cards a popular type of rewards card, especially for people who love to travel and are looking for a specific type of benefit from their card.
Charity Credit Cards
Also increasingly popular is the charity credit card. This is an alternative, ethical credit card choice that allows people to give something back even while they are spending. Charity credit cards work on a simple principle: for everything you spend on your card, you are given cash back. You can then choose which charity or charities you would like to donate that cash back to: you can either pick one that means something to you or your credit card provider will have a list of recommended charities that they like to donate to if you can’t decide yourself.
Charity credit cards are a good way of helping those who are less fortunate while still bringing you all of the normal benefits associated with credit cards.
Cash Back Cards
Finally, another popular type of rewards credit card is the cash back card. These work in a similar way to charity cards: you are given cash back on all of your card purchases and can then choose what you would like to do with it. The amount of cash back you receive will depend on the specific card you apply for and also on what you buy, as some purchases might offer more or less cash back than others.
