Credit Card Guides

Overview of credit card types available

Overview of card types and what to consider when looking at the options

When deciding what kind of card to go for, you should have several pieces of information at hand in before you start exploring the different kinds of cards. Have an idea of the APR you’re currently paying on any cards, what you need a new card for, and what your credit score is. This will help you make an informed decision.

Types of card:

With that in mind, here are some of the cards you might think about applying for. They’re listed from simple to complex in terms of their offering and functioning.

International or Overseas Spending Credit Cards

The purpose of these is quite straightforward: most cards involve a multitude of fees and charges for using the card abroad, including cash withdrawal fees, conversion fees and in some cases prohibitive interest rates. Overseas spending cards don’t have the same amount of fees and charges for spending abroad.

Credit builder cards

Credit builder cards are ideal if you’re thinking of increasing your credit score, possibly with a view to accessing greater credit later on. They have lower requirements for application in terms of credit score, and therefore don’t have as attractive an APR as conventional cards. It’s worth checking these details before applying.

Low rate credit cards

These cards provide interesting benefits. Instead of moving from one card to the next to avail of good introductory rates, it might be more convenient to look for a card that has a stable and acceptable overall rate for the entire lifetime of the card. This can prevent any unexpected rises in rates or fees, and save you time by not having to shop around regularly.

If you’re looking to manage debt, then a balance transfer card might be a better option.

Charge cards

While not technically a credit card, charge cards allow for very transparent financial management in that the balance must be cleared every month or so, and extensive rewards are offered in return.

Cashback cards and rewards cards

Similar to charge cards, these cards offer extensive perks and benefits for using them. Designed for those that can always clear the balance each month and spend enough to warrant the annual fee. As the names imply, in return you can avail of rewards in the case of rewards cards and cashback in the case of cashback cards. Generally, the value of rewards on offer is usually higher with that type of card – but the catch is that they must be redeemed with certain merchant whereas the cash redeemed with a cashback card is just put onto your balance and can be spent anywhere.

Factors to consider when comparing cards of this type:

  • Are you more inclined to rewards with no strings attached, or greater total value of rewards?
  • Does the annual fee outweight the prospective benefits?

Money transfer cards

If you want to top up your bank account for a low or zero interest rate, these cards essentially allow you to borrow money for cheap as long as you pay the amount back within the stipulated period. This can be useful for paying down debt or covering big expenditures.

Balance transfer cards

These function similar to money transfer cards, except you transfer a balance from one credit card to a new one which has a better interest rate setup or a zero balance period in which you can pay off the amount owed. Balance transfers are thus mainly used as a debt control option. They have fees involved, but thankfully those fees are stated up front so balance transfers can bring a great deal of clarity provided you use them wisely.

Factors to consider when comparing cards of this type:

  • Weigh up the fees for the balance transfer vs the duration of the interest free period

Purchase cards

Purchase credit cards are ideal if you have a big spend coming up that you want to fund on low interest credit. They can be a very cheap way to get credit for a large purchase like a kitchen renovation or expensive electronics. The amount debited to a 0% purchase credit card will not accrue interest at all in the interest-free period, so it’s like an interest-free short-term loan.

Factors to consider when comparing cards of this type:

  • Do you want a low introductory rate with a shorter repayment time-frame, or one with a more balanced before and after introductory period APR?

Balance transfer and purchase cards

These cards offer the benefits of both the above entries in one. For example, you could avail of one of these cards and use it to transfer a debt that is incurring interest on another card, and also use it to make a big purchase and avail of a low interest rate.