Different types of credit card: a quick guide

When you`re looking for a credit card, deciding on the best type of card for your needs is an important decision.

Whether you want to use your card for day-to-day purchases, more expensive items or even repaying debt, there`s a credit card to suit you. Here`s our quick guide to some of the different types of credit card available.

0% interest credit card

As the name suggests, a 0% interest card (also known as a 0% purchase credit card) won`t charge any interest on your purchases for a certain time period. The interest-free period on these cards often lasts for a year or sometimes more, and in this time you`ll be able to spend money on your card without having to worry about interest building up (as long as you meet all required minimum payments).

As such, 0% interest credit cards are useful for day-to-day purchases or even bigger purchases that may take a little longer to pay back. However, be sure to repay the debt before the 0% interest period ends, as you could otherwise end up paying a lot of interest. Alternatively, you may be able to switch to a similar deal on another card.

Read more about 0% credit cards

0% balance transfer credit card

These cards don`t charge interest on balances transferred from other cards for a limited period, effectively enabling you to repay those debts interest-free. But these cards typically charge a balance transfer fee, usually 2-5% of the balance owed, which may affect whether it`s a worthwhile option.

Again, in order to avoid paying interest, you will need to meet all minimum repayments due and repay your balance in full before the 0% period ends, or switch to another 0% card.

Read more about 0% balance transfer cards

Rewards/cashback card

Some credit cards offer cashback or other rewards on the money you spend. Usually, you`ll receive all your rewards once every 12 months - so while it doesn`t exactly give you money back as you go along, it does give you a nice bonus at the end of the year.

To get the maximum rewards out of this type of card you should use it for all your non-essential purchases, but make sure you budget for it in advance to minimise the chance of being unable to repay your debt.

Read more about cashback & rewards cards

Bad credit credit cards

Credit cards for bad credit can be very useful for people who have previously struggled to manage their credit, by helping them to gain more experience with credit and rebuild their credit rating. However, as they usually carry a much higher interest rate than other cards, it`s imperative that the borrower budgets for the repayment of anything borrowed and aims to repay the balance before any interest is applied. If they don`t, it could turn out to be an expensive form of borrowing in the longer term.

Read more about cards for bad credit

Remember, though: whatever card you choose, the golden rule is to only ever borrow an amount you know you can afford to pay back. For example, a 0% interest deal may be tempting, but if you can`t afford to repay what you`ve borrowed at the end of the 0% period you could end up paying a lot more than you intended.

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Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.