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Types of credit cards

Our guide to the different types of credit cards

published: 13 October 2022
Read time: 5 minutes

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

When it comes to choosing a credit card, it can be tricky knowing where to start. There are several different types of credit card - all with different features and benefits. Whether or not you’ll be accepted for a card can also be unclear. Here, we cover the different types of credit cards available in the UK, so you can make the right choice for you. 

What to consider before getting a credit card?  

Before getting a credit card you should decide what you want to use it for. For example, it could be to spread the cost of a new purchase, gain cashback every time you spend, build your credit score or help pay off debts at a lower interest rate. This will help determine what kind of card to apply for such as a purchase, rewards, credit builder or balance transfer credit card. 

Credit card

What are the different types of credit cards?   

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 do they 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 - You’re more likely to be accepted if you have a poor credit rating and it could help you boost your credit score making borrowing easier and cheaper in the future. 

Potential disadvantage - You’re likely to face higher interest rates on your borrowing and you’ll receive a lower credit limit than you might with other standard credit cards. 

Who is it best suited for? - 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 do they 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. You’ll then pay off what you owe on your new card over time at the lower – or 0% interest rate.  

Main advantage - By reducing the interest that will accrue on your credit card debt you can pay it off faster.   

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 - this could be around 20% for example. 

Who is it best suited for? - 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 youmake ‘eligible transactions’ using the card. Be aware that not all types of spending on the card will accrue points or rewards. 

How do they work? - You can earn rewards with certain types of spending on the credit card. This will vary depending on the type of card you have and where you spend. For example, the card might be linked to a certain retailer or airline. Other rewards, such as cashback on purchases might be capped at a certain level. 

Main advantage - Rewards cards give you a nice bonus or kickback when you spend.As long as you don’t spend more than you might usually on your credit card, just to get the rewards, it’s a bit like getting something back for nothing. 

Potential disadvantage - A lot of rewards cards charge a monthly or annual fee. You’ll also face fees if you use your rewards credit card abroad or at a cashpoint. The standard interest rate on rewards cards can be high – so aim to pay off your balance in full every month.   

Who is it best suited for? - Credit card users who clear their monthly balance in full and spend enough to take advantage of the rewards on offer - particularly if there is a monthly fee for the card. 

Purchase credit card

What is it? - Designed for shopping or larger purchases, a purchase card lets you spend and then pay it off over a period of time. You could even get a card with 0% interest period over several months, which helps you spread the cost of a big purchase. 

How do they work? - You make a purchase on the card and then have a fixed number of months to repay the balance before you start being charged interest.  

Main advantage - Allows you to spread the cost of large payments, so you can buy items today rather than having to save for months - particularly useful in the case of emergency purchases. 

Potential disadvantage - Once your 0% interest period ends, the interest rate on your card is likely to rise steeply so either aim to pay off your balance or switch to a new 0% card, where possible. 

Who is it best suited for? - Someone who wants to make a large purchase but would prefer to spread out the cost over the following months. 

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 do they work? - With a specialist travel credit card, you won’t be charged a fee, or fees will be low, when you spend overseas. You may also see fees waived at ATM machines abroad - but like any credit card, you’re still likely to have interest charged immediately for cash withdrawals.   

Main advantage -Can keep down the cost of spending abroad and gives you peace of mind you’re not being ripped off by hidden fees. 

Potential disadvantage - Some travel credit card providers may expect you to clear your balance each month and charge you a high APR if you don’t make your repayments. 

Who is it best suited for? - People who are travelling abroad and want to keep foreign exchange fees to a minimum. 

Money transfer credit card

What is it? - A money transfer card allows you to move money from your credit card to a bank account. 

How do they work? - You can move money from your money transfer card straight to your bank account and then use it for whatever you need.   

Main advantage - They can be useful to help pay off overdrafts or give you access to cash. 

Potential disadvantage - As with a balance transfer card, there will usually be a one-off fee for the money transfer. You may also face high interest rates after the introductory period ends.   

Who is it best suited for? - If you need to quickly pay off a high-interest overdraft on your current account, for example.  

Other useful guides

We have a range of helpful guides if you’re looking for a credit card: 

 Compare credit cards with MoneySuperMarket

Finding a new credit card to suit your needs is quick and easy with MoneySuperMarket. Just give us a few details about you, your finances and the type of card you want, and we’ll search from a wide range of leading providers so you can browse the options available.   

We’ll show you the best card deals to suit your needs – and your chances of being accepted if you apply. And best of all – searching won’t harm your credit rating in any way. 

Find a new card