As of May 2021, there were 59 million credit cards in issue across the UK. During that month, the total spend on them of £14.9 billion was more than 55% higher than the figure for May 2020.
Credit cards can have many advantages when used responsibly, as you can choose how much to spend and how much you can afford to repay each month. But have you ever wondered what the difference between the various types of credit cards is?
If so, the good news is that we’ve rounded up some key information so you can make an informed choice.
What Types of Cards Are There?
1. Reward cards
As the name suggests, with a rewards credit card you get rewarded for spending. Whether that’s in the form of cashback, vouchers or otherwise – they’re handy if you want to make your money go further.
2. Balance transfer cards
A 0% balance transfer card allows you to transfer debt from another credit card onto this one. This will then mean you can pay off the balance on your existing card without interest.
However, these credit cards aren’t 0% forever. It’s important you assess your financial situation and know you can afford the repayments when the initial rate is increased.
3. Purchase cards
A purchase credit card is for spending. Excluding things such as balance transfers or withdrawals, a purchase card is designed so you can make purchases and spread the cost over several months.
They often come with a 0% interest period, meaning you won’t pay more by spreading the cost over a longer period.
They are therefore a great option if you can make large repayments over a short amount of time.
4. Travel credit cards
Travel credit cards are designed for (you guessed it!) traveling. Made with holidaymakers and regular travelers in mind, they often make it cheaper for you to spend overseas. In fact, some even reward you for doing so!
One of the main benefits of travel credit cards is that they don’t charge you fees when you use them abroad like many traditional credit and debit cards.
You can spend without being stung by non-sterling transaction fees and exchange rates. You can even use them to buy from foreign websites!
5. Cashback credit cards
Designed to reward you for responsible spending, cashback credit cards will pay the money back into your account based on how much you’ve spent.
They are slightly different from rewards credit cards. Cashback credit cards give you money back, while rewards credit cards will also allow you to accrue points that can be redeemed.
Although it can be overwhelming deciding which credit card is right for you, it’s worth taking the time to understand the different types. From cashback to rewards, purchasing, and traveling – if you can afford the repayments, a credit card can be a great option to help manage your finances.
Featured image: Unsplash (Avery Evans).