Published: 25/10/2022
There are so many variations when it comes to borrowing, it can get confusing knowing which ones would work for you. There are cards for spending, cards for balance transfers, cards with rewards… how do you know which type of credit card is the best pick for you?
Here at Aro we want you to be informed when it comes to your finances, and that includes keeping things simple when dealing with loans and credit cards. To help, we’ve put together a simple overview of the most common types of credit cards, so you can navigate the jargon and complicated terms to find the best card for you.
What are the different types of credit cards?
The cards available to you will depend on your personal circumstances and credit score. Here’s a simple rundown of each of the most common types of cards.
0% balance transfer
Purpose: Credit card debt management
Features:
- Has a period of 0% interest from setup that can range from 1-2 months up to 2-3 years
- Transfer credit card debt onto this card and prevent interest from building during the 0% period
- A fee is usually charged (commonly around 3%) to set up the initial full transfer
Credit score availability:
- Usually available to most people
- Customers with low credit scores may see restrictions, such as lower limits or shorter 0% periods
There may be a fee to transfer a balance. Once a 0% period ends, the card’s usual rate will apply.
Purchase rewards
Purpose: General, repeated use
Features:
- Rewards such as discounts, cashback and retail offers are tied into use
- Higher use equals greater rewards
- Introductory rates are higher per amount spent, but usually capped on how much reward you can get in that period
Credit score availability:
- Good scores are usually required to open a rewards card
0% purchase
Purpose: Large purchases
Features:
- Usually has a limited interest-free period to assist with paying off a big purchase
- Minimum payments required otherwise 0% period will end earlier than planned
- Interest applies at end of 0% period, usually at high APR (20-30% is common)
Credit score availability:
- Good to high credit scores required
Once a 0% period ends, the card’s usual rate will apply.
Credit builder
Purpose: Improving credit rating for poor and low scores
Features:
- Low credit limits, high interest rates
- Designed to be used little-and-often and paid off in full to build credit history
- If not paid off, will be subject to high APR (30%+ is common)
Credit score availability:
- Aimed specifically for low or poor credit scores
You’ll need to make at least the minimum monthly repayment (and keep up with any other credit commitments) to get the credit score benefits.
Travel credit
Purpose: Keeping costs low when travelling abroad
Features:
- Many debit and credit cards have currency exchange fees and non-£ cash fees
- Travel cards do not, allowing you to use them in any country agreed to without extra penalties
- Usually have high APRs, so should be paid off in full and avoided if borrowing is needed
Credit score availability:
- Good credit scores are usually needed
Money transfer
Purpose: Making cash available to use
Features:
- Allows customers to move money from the card to their main account, making a balance available for spending
- Usually has a transfer fee (3-5% is common) for moving the balance
- Often have long pay-off periods at 0% before interest begins to be charged on full amount (the balance moved and transfer fee)
Credit score availability:
- Generally need to have mid to good credit scores to access these cards
- Interest rates, 0% periods and credit limit available will depend on credit score
There may be a fee to transfer a balance. Once a 0% period ends, the card’s usual rate will apply.
Finding the right card for you
If any of the different types of credit card sound right for you, you can find out which are available to you in minutes. Using our soft credit check we can see how likely you are to be approved, showing your options without harming your credit score. Check your eligibility for them quickly and easily at Aro.
