Guide to Types of Credit Cards
Introduction Standard Credit Cards 0% on Balance Transfer Credit Cards 0% New Purchases Credit Cards Low APR Credit Cards Cashback Credit Card Student Credit Cards Business Credit Cards Prepaid Cards Charity & Affinity Credit Cards Sports Credit Cards Store Credit Cards Rewards Credit Cards Loyalty Credit Card Airmile Credit Cards Contactless Credit Cards (Touch & Go Credit Cards) Lifetime Balance Transfers Credit Cards Credit Cards for Bad Credit History
| Introduction | Top |
Some thirty odd years ago I first discovered the delights of a credit card, which if I remember correctly, was a Visa Barclaycard. I can still remember my first purchase with it, a music centre, with a record deck and a tape deck (Now who of us still remembers those?), and I was hooked, the get it now, pay for it later urge was awakened in me and has been awake ever since.
Over the next few years my flexible friend changed colour, first from blue to gold, and then to platinum, and then back to gold and finally to a strange purple colour the meaning of which is totally beyond me. Along the way I also acquired an American Express card (That will do nicely, thank you) and a number of store, garage cards and supermarket cards.
How it has all changed in today’s credit card market, there are literally over a thousand different credit cards available, so choosing the right one for your particular set of circumstances becomes somewhat of a daunting task, don’t fall into the trap of ‘pick a card, any card’, as you could end up paying out a lot more of your hard earned cash than you need to.
Depending on what you need a credit card for, there is a wide range of choices available, from a simple credit card where in effect you ‘borrow money’ to pay for your purchases, to a charitable credit card (sounds strange to me) where you can donate via a credit card to the charity of your choice, but more on this later.
The main reason for acquiring a credit card is so that we can buy things with it, sometimes buying things that we otherwise could not afford. With the phenomenal rise in online buying, a credit card gives you access to all the goodies on offer on the World Wide Web. Another thing is that with our time being in short supply due to always being in a rush, a credit card helps us save time at the supermarket, petrol station, in fact, wherever we need to spend money.
Another reason for obtaining a credit card is to consolidate all your outstanding credit card debts into one, which will make the whole thing easier to control and allows you to take advantage of lower interest rates that some credit card providers offer.
However, regardless of what type of credit card you have or require, one thing regarding credit cards continually remains constant, you have got to pay it back, either by paying the minimum amount on your outstanding balance, a lump sum paying the balance off or some payment somewhere in between. The credit card’s limit is usually worked out by you and the credit card provider, and takes into account such things as your salary, employment status, how much you already owe in outstanding debts, what outgoings you have, and other relevant personal circumstances.
Now, as I said before, there are over a thousand different types of credit card to choose from, and different types of card suit different types of circumstances. Make sure that you choose the right credit card for your particular set of circumstances, as using the wrong card could prove very costly indeed. For example, taking the ‘wrong type of credit card ‘ on holiday with you could add quite an additional amount of money to the overall cost of your holiday due to high interest rates and charges associated with the credit card, whereas there are specific types of credit card that are ideally suited to being used abroad.
Another thing to consider when choosing a credit card is, what is your personal attitude to debt. If you are one of those types of people who hate being in debt (don’t we all) and pay off your outstanding credit card balance every month, the best type of credit card for you is not necessarily the one with the lowest interest rate, but rather the one with the best perks and freebies, such as free travel insurance, free quality gifts, free entrance to events and even free holidays.
For the rest of us who splash out on a ‘want it now’ item and plan to pay off the credit card debt over a period of time, then you need a credit card that offers the best interest rates including introductory rates and a low rate for transferring balances. The majority of standard credit cards offer zero percent interest for up to 59 days.
As I have already mentioned (twice), there are over a thousand different credit cards floating about in the UK financial marketplace, and below I have listed some of the more common types of credit card.
| Standard Credit Cards | Top |
The majority of standard credit cards in circulation today have been issued by either Mastercard or Visa, and can be used in virtually every country in the world. There are various types of standard credit cards available, standard, and premium (otherwise known as gold or platinum credit cards). They are available from most major banks and other major financial organizations, and are unsecured, in other words, you don’t have to ‘secure’ the credit card with some form of possession such as your home. Providing you are over eighteen years of age and have a clean bill of health credit wise, standard credit cards are available to everyone. Premium credit cards usually offer a lower rate of interest than standard credit cards, plus they also usually offer additional benefits. Premium credit cards are normally only issued to those people on higher salaries, and sometimes incur additional charges. With most types of standard credit cards the balance can be paid off within the given period of time without incurring any interest charges, alternatively, you can pay off a part of the outstanding balance with the remainder being carried forward to the next month and incurring interest accordingly. The way the annual interest rate is worked out varies from credit card to credit card.
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0% on Balance Transfer Credit Cards |
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This type of card allows the user to transfer the balance of his/her existing credit card to a credit card that offers 0% on the balance transferred for a limited period of time, usually between seven months to a year. So, providing you think you can pay off the balance within the time period the 0% transfer credit card gives you, then you can save yourself some money.
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0% New Purchases Credit Cards |
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This type of card allows the prospective purchaser to purchase certain types of goods, at a zero percent interest rate providing you pay the outstanding balance off during the time period that the promotional zero percent interest rate lasts for. Not all purchases can take advantage of zero percent interest rates as credit card providers have definite rules as to what just exactly a ‘new purchase’ consists of.
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Low APR Credit Cards |
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Low APR credit cards are exactly what their name implies, they offer, for a certain period of time a low APR (Annual Percentage Rate) which means that the repayments will be less than for a standard rate card during the promotional period. This type of card can be beneficial to a prospective buyer as it gives the buyer the opportunity to pay for the goods with a credit card and then pay off the balance with only a low amount of interest added. Before you decide on a Low APR credit card, double check on just exactly how long the promotional period runs for and that the period coincides with your plans to pay off your purchases debt during that period of time.
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Cashback Credit Card |
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The idea of this type of card is that providing you are diligent in paying back the outstanding balance on your credit card every month, the credit card provider will reward you by paying you back a percentage of what you spent during the preceding month. The amount that you will receive as a cashback payment will depend what the percentage the cashback credit card is offering. Rates vary from around 0-5% up to 5% during introductory or bonus periods. How much you will receive will depend on how much you spend with the cashback credit card, the more you spend the more you will get back. When you actually receive your cashback payment, depends on which cashback credit card you are using. Some credit card providers pay cashback monthly, some quarterly, and some others half yearly.
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Student Credit Cards |
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Being a Student whilst being the best part of you life academically, may not be the best part of you life financially. Planning your life around a financial budget is a difficult task in any situations, but when you are a student it becomes virtually impossible. Course fees, food bills, lodging, and other minor bill are a real pain, and if you include the major outgoings such as beer it becomes a real problem making ends meet. This where in some cases a student credit card may help, although a student credit card should be viewed as a short term strategy, or gap filler rather than a long term solution.
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Business Credit Cards |
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A business credit card can be a very helpful business partner when it comes to running a business. With a business credit card you can achieve better cash flow and greater financial control over your business finances. Easier travel arrangements and membership perks are some of the other benefits that can be obtained from using a business credit card in conjunction with running your business.
Before you jump in and go for a business credit card, take a little time to think about what you are going to use it for, and choose one that specifically suits your needs.
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Prepaid Cards |
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A prepaid card is what it sounds like, a card that has a prepaid amount on it, which the owner of the prepaid card can spend on what he or she likes. Unlike a credit card, a prepaid card has no credit facilities so there is no chance of running up a debt as the only money that comes out of a prepaid card is what you have put in to the prepaid card. For all intents and purposes, the retailer treats your prepaid in exactly the same way as if it were a credit card. It has a PIN number that you will need to key in to gain access to the prepaid card, and the amount spent is debited from your prepaid card account .The same thing applies when shopping online, your prepaid card is treated in exactly the same way as a normal credit card. Be aware though, that you cannot spend more than what is loaded onto your prepaid card.
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Charity & Affinity Credit Cards |
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For those of you who contribute to worthy causes, one way of donating is to use a charity or affinity credit card. Although you cannot claim tax relief on the donations your chosen charity receives, you can rest assured that your favourite charity is benefiting from your use of a credit card. Charity or Affinity credit cards work in much of the same way as other credit cards, rather than earning points for free gifts, a Charity or Affinity credit card donates an amount of money to your chosen charity every time you use the credit card. Typical amounts vary, but on average a charity or Affinity credit card donates between 5.00 GBP to 10.00 GBP the first time you use them, after which they donate around 25p to 60p for each 100.00 GBP spent. However, you should bear in mind the fact that charity or affinity are not renown for low interest rates, so although it may suit those of us that clear our outstanding balance every month, it may not suit those of us who borrow money on our credit card at regular intervals.
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Sports Credit Cards |
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For all you sports fans out there, you may be interested in helping your favourite team by supporting them financially as well as with cheers and shouts. A sports credit card allows you to set up monthly payments to your favourite sports team.
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Store Credit Cards |
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Store credit cards are issued by the owners or retailers of a particular store or chain of stores for use within their stores or chain of stores. A lot of these types of store cards can only be used for purchasing goods or services from retailer that issued the store card. In many instances store credit cards double up as store loyalty cards.
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Rewards Credit Cards |
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To get your custom, credit card issuers come up with all sorts of offers, one of these is the reward credit card. This type of credit card gives the user a reward (usually in the form of points) for spending a certain amount of money with his or her credit card every month. Just exactly what that reward will be depends on the credit card issuer, and can vary from ‘air miles’ to fine wines.
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Loyalty Credit Card |
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This type of credit card rewards you for your loyalty towards a particular shop or store. In other words the more you spend at the shop or store, the more you are rewarded.
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Airmile Credit Cards |
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Airmile credit cards are based on a points scheme, where the more miles you fly paid for with your airmile credit card, the more points you will earn that you can then exchange for flights to different destinations. There are two main ways of earning airmiles, either by paying for your flights with a specific airmile card issued by an airline, travel group etc, or with a credit card that offers airmiles as a reward. There are quite a few different options available, and it can be quite difficult to work out the actual worth of points, but this guide will highlight what you need to look out for when choosing a new card.
| Touch & Go Credit Cards |
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The days are numbered when you actually ‘hand over’ you credit card to be processed for payment. With contactless credit cards you simply wave your credit card in front of a special RFID reader and that’s it, no pin number, no signature and you have kept hold of the card throughout the entire transaction.
| Lifetime Balance Transfers Credit Cards |
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If you are looking for a long term commitment to a credit card that offers a low rate of interest on balances transferred, and you can repay that balance during the period of time that the lifetime balance transfer credit card offers then this type of card may well be the one for you.
| Credit Cards for Bad Credit History |
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If for some reason you are unable to get issued with a credit card due to either to a bad credit history or little or no credit history, then to enable yourself to build or rebuild your credit history you could apply for a credit card that is designed for people that the credit card issuers see as a higher credit risk. These types of credit card sometimes known as adverse credit cards have much higher APRs than normal credit cards. They also usually have much lower credit limits. The reason for this is of course because the credit card issuers of adverse credit card see their users as a greater risk than that of a standard credit card user.
