What types of credit cards are available in the UK?
Struggling to decide on the best type of credit card for you? Our guide covers the types of credit card available and their differences so you can compare
Key takeaways
It is important to research and choose a card that aligns best with your financial goals
Different credit cards offer different benefits and some can even help build your credit score
Watch out for high interest rates and any associated card fees
When it comes to managing your finances, selecting the right credit card can feel overwhelming. Each card comes with its own set of features and benefits, tailored to different spending habits and financial goals.
You may also be worried about not being accepted for a credit card. This guide explores the different types of credit cards, so you can find one that’s best suited to you.
What should I consider before getting a credit card?
Before you start a credit card application, it's crucial to reflect on the primary purpose of your card.
Are you looking to spread out the cost of purchases, earn rewards on your spending, build your credit score, or consolidate debt with lower interest rates?
This will steer you towards the type of card that best fits your needs, be it a purchase, rewards, credit builder, or balance transfer card.
What are the different types of credit cards?
Credit cards come in various forms, each designed to cater to specific financial needs and spending patterns. Let's break down the different categories and examine their individual characteristics.
Credit builder credit card
What is it? A credit builder card is ideal for people with bad credit or little or no credit history who want to improve their credit rating.
How does it work? You spend on your card as you would with any other credit card, and as long as you keep up with the minimum monthly repayments it should help your credit score improve over time.
Main advantage: It offers a higher likelihood of acceptance for individuals with poor credit ratings and can enhance future borrowing conditions.
Potential disadvantage: Often feature higher interest rates and lower credit limits when compared to standard credit cards.
Who is it best suited to? Someone who has bad credit or no credit rating, such as young people who haven’t borrowed before or people who have just moved to the UK.
Balance transfer credit card
What is it? A balance transfer card lets you transfer your existing credit card balances onto one low rate or 0% rate card. This can help you consolidate your existing debts and pay them off more quickly – at a lower or 0% rate
How does it work? Once your new card is approved, you can ask the provider to shift the balances from your old credit card or cards onto the new one – known as a balance transfer. There is usually a one-off fee for this which is a percentage of the balance transferred (typically 2% to 3%). You can then close your old credit card accounts. Ideally, you’ll then pay off what you owe on your new card before the lower or 0% interest rate ends
Main advantage: Significantly reduces the amount of interest that accrues, allowing for a faster repayment of debt
Potential disadvantage: As well as having to pay a balance transfer fee, if you don’t clear the debt by the end of the low or 0% introductory interest period, you could face much higher interest payments. This is because the interest rate will jump up to the standard rate or APR, which could be around 20%
Who is it best suited to? Someone who is paying high interest on their existing credit card debt and has a good enough credit rating to switch to a better or lower rate card
Rewards credit card
What is it? A rewards credit card gives you the opportunity to earn points, cashback, air miles or other rewards when you use the card. Be aware that not all types of spending on the card will accrue points or rewards
How does it work? Rewards vary depending on the card and where you spend; some are linked to specific retailers or airlines, and there may be caps on the rewards you can earn
Main advantage: Earn a bonus on your spending without incurring extra costs
Potential disadvantage: Possible fees associated with the card, such as monthly or annual charges, and typically high standard interest rates which necessitate paying off the full balance each month
Who is it best suited to? A higher spending individual who regularly clears their balance and can reap the benefits of the rewards, taking into account any associated card fees
Purchase credit card
What is it? Designed for shopping or large expenditures, a purchase card often offers an introductory extended interest-free period for repayments
How does it work? It provides a set duration to pay off purchases before interest charges commence
Main advantage: Allows for the spreading out of costs for large purchases, which can be particularly helpful for emergency expenses
Potential disadvantage: Once your 0% interest period ends, the interest rate on your card is likely to rise steeply. Aim to pay off your balance before the higher rate kicks in
Who is it best suited to? Individuals who need to distribute the cost of a significant purchase over a period
Purchase and balance transfer credit card
What is it? A balance transfer card that can accept debt from other credit cards, but is also suitable for spending
How does it work? You can move a balance from an existing card onto the new card and may be charged a one-off transfer fee. However, unlike a single-focused balance transfer card, you can also use the card for additional spending without facing a high interest rate
Main advantage: Gives you the versatility of being able to clear debt while still retaining a facility for additional spending on credit if needed
Potential disadvantage: Could be a bit of a halfway house compared to dedicated balance transfer or purchase cards. For example, you might receive a lower limit and less attractive rates for the balance transfer, and a shorter 0% interest-free period for purchases
Who is it best suited to? Individuals who want the flexibility of being able to move debt from elsewhere while continuing spending, as well as customers wanting to keep the number of credit cards they have to a minimum
Travel credit card
What is it? A travel credit card is designed for using abroad because it can help you avoid hidden charges such as big foreign transaction fees.
How does it work? The card offers low or no fees for spending abroad and may provide fee-free cash withdrawals, though interest on withdrawals often starts immediately.
Main advantage: Minimises the cost of spending overseas and sidesteps hidden fees.
Potential disadvantage: Some cards may require paying off the monthly balance and can charge high APR for missed payments.
Who is it best suited to? Travellers who want to reduce foreign exchange costs.
Money transfer credit card
What is it? Allows you to transfer money from your credit card directly into a bank account.
How does it work? Enables the transfer of funds to a bank account to cover various needs, such as paying off an overdraft.
Main advantage: Offers a way to access cash or pay off high-interest overdrafts.
Potential disadvantage: Incurs money transfer fees and high-interest rates after any introductory offers.
Who is it best suited to? Those needing to quickly repay high-interest overdrafts.
Student credit card
What is it? A credit card aimed at students who might not have a regular income.
How does it work? The same as a regular credit card, but better approval rates for students than other cards.
Main advantage: Provides flexibility with your spending and helps to build a credit profile.
Potential disadvantage: Could increase the level of student debt if the balance isn’t cleared on time each month.
Business credit card
What is it? A dedicated credit card to help business spending.
How does it work? Just like a regular card, but should be reserved for business expenses.
Main advantage: Helps firms with flexible financial management and helps keep personal and business finances separate for small businesses.
Potential disadvantage: There can be a lack of Section 75 protection, though some cards offer fraud and misuse insurance.
The different types of credit cards at a glance
Type of credit card | Main feature | Advantages | Disadvantages |
|---|---|---|---|
Balance transfer | 0% interest on transferred balances | Consolidates debt to save on interest | Balance transfer fees. Rates rise sharply when promotional period ends |
Purchase | 0% interest on purchases for a period | Spread costs interest-free on large purchases | High interest after the promotional period ends |
Combined purchase and balance transfer | 0% on both transfers and purchases | Flexibility to manage debt and spread purchase costs | Shorter promotional periods than single-focus cards. Fees may apply |
Money transfer | Transfers funds to your bank account | Pay off overdrafts or other non-credit card debts | Fees for transfers. High interest after the promotional period |
Rewards | Earn points, cashback, or air miles | Perks for everyday spending | Often higher APR or annual fee. Rewards may require high spending |
Travel | Fee-free overseas spending | Avoid foreign transaction fees. Competitive exchange rates | Often high APR. Limited perks unless used abroad frequently |
Credit builder | Designed for those with poor/no credit | Helps improve credit score with responsible use | Low credit limit and high interest rates |
Student | Tailored for students | Interest-free perks. Lower limits to control spending | Limited rewards. Higher APR after introductory offers |
Business | Designed for managing business expenses | Tracks spending; often includes cashback or perks | Not suitable for personal use. May require a strong credit history |
Personal Finance & Insurance Expert
Our expert says
Understanding the type of credit card you want is one of the most important decisions when you apply. So, while you don’t have to be a personal finance expert, knowing a card’s features and how it works is vital to help you maximise the card’s value and stop you making financial slip ups.
Other useful guides
To further your understanding of credit cards, consider exploring additional guides:
Compare credit cards with MoneySuperMarket
Finding a new credit card that matches your individual needs is simple with MoneySuperMarket. By providing a few details about yourself, your financial situation, and the type of card you desire, you can swiftly compare offerings from a wide range of leading providers.
This service helps you discover the best deals and gauge your chances of acceptance without impacting your credit score.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
Reviewer
Jonathan Leggett
Former Senior Content Editor
With over 15 years of experience in online content and journalism, Jonathan is a former MoneySuperMarket’s editor at large and works across our Broadband, Mobiles, Energy and Money channels. Along...
