Totally Money explains some of the different credit card types on the market and how they might be useful, to ensure you make the right choice when looking for a credit card.
There are several different types of credit card on the market and you can get some great benefits by choosing the one that’s right for your situation. However, it’s important that you know how each card works and how to get the best results from it. Let’s go through some of the cards available to you and how best to use them.
Purchase cards help you spread the cost of a one-off item and they will usually offer a 0% interest rate for an introductory period. If you are certain you can pay off the balance in this period, then purchase cards allow you to borrow money without paying interest, making it more cost effective than other forms of borrowing. But be careful, after the introductory period the interest rate will usually jump to a high level, costing you a lot of money while you pay the balance off.
Balance transfer cards
Lots of people don’t know what balance transfer cards are, which is a shame as they can save the average consumer some serious money. They work by allowing you to transfer your balance from a credit card onto one that charges no interest for a set introductory period, although there is usually a percentage fee for transferring over the balance. As with the purchase card, if you are confident that you can pay off the balance in this period then you could save yourself a lot of money. Once again though, you must be careful as the interest rates after the introductory period will be quite high.
Rewards cards allow you to earn points which can later be exchanged for travel, merchandise or discounts over a period of time. Most people have heard of rewards cards that offer Avios (what used to be called Air miles) to their customers, but there are many other awards offered by different cards that might be more enticing to you. For example, if you’re a regular customer at a certain store, they might offer a loyalty card which rewards customer for their spending. Other rewards cards can let you exchange your points for cinema or theatre tickets. There’s a lot of offer, so don’t delay looking around for the cards that offer the best rewards.
Cards for poor credit
If you are having trouble borrowing money due to your credit rating then you should look into credit cards for people with poor credit. They will often have high interest rates though, so you must be sure you can pay off as much of the balance as possible each month.
These types of cards are great if you have a poor credit history and need to borrow money, but they can also help you rebuild your credit rating. If you keep up with repayments (or better yet – pay off your balance in full each month) you will be demonstrating to lenders that you can be responsible with your finances, which in turn could improve your credit rating.
Getting the best card
If you’re considering taking out a credit card, you need to ensure you choose the right kind and get the best deal. You might find ‘How to find the right credit and loan for you’ useful to help you through the process with a few hints and tips.
Noddle’s Card Matcher can also support you, as it shows a range of credit cards available to you based on the likelihood of approval. This is calculated using the information in your credit report.
Remember to do your research when applying for a credit card or any other form of credit to ensure you get the best deal.