A Guide to Different Types of Credit Cards

Credit cards are a common financial product used by a large portion of the adult population. However, there are many different types out there, so we have put together a brief guide to help navigate the complex world of credit cards.  

 

Standard credit cards 

These credit cards are among the most common for a cardholder to have. A unique feature of these cards is that they are unsecured. ‘Unsecured’ might seem like a bad thing, but an unsecured credit card means that there is no down payment needed to prove money spent can be repaid. Two examples of a standard credit card are balance transfer and low-interest rate.

 

balance transfer credit card allows transfers between high-interest cards with balances to be moved to a card with low to no interest. Most cards have a temporary annual percentage rate (APR) of 0 percent last for a few months to a year. Consumers must be careful while using a balance transfer card because all term of conditions differ from card to card.  

 

Low-interest credit cards can be useful for consumers who are about to make a big purchase. These cards have low APRs for a certain amount of time or have a fix low-interest rate, giving consumer time to pay off debts without any or limited interest.  

 

Rewards Credit Cards 

Rewardbased credit cards have incentives for using the card while purchasing. Every pound charged on the card builds redeemable points. The points redeemed can be used for various rewards, differing with each card.  

 

Cashback reward cards are a good choice for those who pay off their balances each month. The more the card is used, the more cashback rewards a consumer can gain. With most cashback cards consumers earn 1 percent of their purchase price.  

 

General reward points cards rewards system functions similarly to the cashback cards. The more money spent on the card, the more rewards a consumer will gain. Cardholders of a general reward cards can redeem a range of items from gifts cards to plane tickets. 

 

Hotel or travel points cards are co-branded with hotelsConsumers with hotel or travel points cards earn points for all purchases made with the card, with additional bonus points for purchases for stays at hotel chains associated with cards. Cardholders can use points towards free nights or upgrades at the co-branded company. Many of these cards come with annual fees which could possibly negate the rewards.  

 

Retail rewards credit cards are co-branded, with retailers allowing cardholders to earn points on everyday purchases and gain extra points while purchasing with the associated retailer. One a retail rewards card differs from other rewards credit cards it that the consumer must use points for products or services from the retailer their card is associated with.  

 

Frequent Flyer Credit Cards

Although other rewards-based cards can earn consumer plane tickets, frequent flyer cards are meant specifically for air travel. These cards allow consumers to earn points towards airline miles. There are two types of airline mile cards: Airline-specific credit cards and generic airlines miles cards.  

 

Airline-specific cards are associated with one airline, where consumers earn points from travel with or buying from the brand. The specific brand cards give bonus rewards to cardholders such as priority boarding and no baggage fees. Generic airline cards allow consumers to earn rewards for traveling with any airline, travel agent, or online site. A generic airline card is useful for consumers who do not travel often or who are not loyal to an airline company. 

 

Bad Credit and Credit Repair Cards 

Not everyone has the best credit score, but they can still get a credit card. There are several cards designed to help rebuild credit. One option for people with little or bad credit is a secured credit card. A secured credit card needs collateral, or a security deposit, for approval. The deposit is usually the amount or greater of the credit and a house, car, boat, etc. can be used as collateral.  

 

Another option for credit repair is not a credit card at all but a prepaid card. A prepaid card does not have finance charges and helps consumers avoid debt because the items are paid for at the time of purchase. This type of card avoids the risk of building credit card debt.  

 

Specialty Credit Cards 

These cards are designed for consumers with specific needs such as students and businesses. Business credit cards are for business executives or owners that provides cardholders with usual credit cards features along with additional bonuses. Consumers with business credit cards benefits include keeping business expenses and personal expenses separate, expense management reports, and additional cards for employees. Student credit cards are for university students with little credit history. These cards give students an avenue to build their credit history.

  

If you want help taking charge of your finances and your future security get in touch with us today at enquiries@gpfm.co.uk or call 01992 500 261 now and see how we can help address your financial future. 

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This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.  

About gpfm    

gpfm are an independent financial planning company dedicated to the provision of personal, professional and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.