Since they first came into popular use in the 1940s, credit cards have been occupying space in wallets and purses around the world.
People use them to help pay for big purchases or to make simple daily transactions – in fact, credit cards are such a big part of the average person’s day-to-day spending that we sometimes don’t realise the huge variety of choice available to us when it comes to types of cards and the benefits they each offer.
Credit cards are most commonly issued by your bank or independently by providers like Visa, Mastercard and American Express. Today however you can also open a credit card with your favourite merchants and retailers; they’ll each offer their own unique benefits but all work the same in that you’ll be able to purchase items on a credit basis that you pay for later.
Different types of cards
Understanding the benefits of each type of credit card will make it easier to choose the one that is best suited to you. Some of the most popular are:
- 0% Balance Transfers – These types of cards are particularly popular with consumers who already have one or several other cards with balance on them. 0% Balance transfer cards allow you to transfer money from one credit card to a new one, potentially saving you hundreds of pounds if you’re paying interest on your current credit card’s balance. Depending on the deal available, you’ll receive a period of 0% interest – typically between 12 – 18 months, though sometimes as high as 27 – giving you time to pay off any balance without accumulating more interest.
- Rewards and Points – Rewards cards offer consumers an incentive to purchase by awarding points for each pound spent. If you’re already in the habit of using your credit card regularly for daily purchases and paying your balance off quickly this might be a great option for you. You can choose between cards that reward you with Airmiles, shopping points for retailers like Tesco Clubcard points or Nectar rewards points, or even cashback.
- Credit building – If you have a low credit rating or simply haven’t established a credit score, a credit building card is a good approach to take. These cards are specifically designed for people with limited or poor credit history, and by repaying a credit card with a modest balance each month can help you build your credit rating, which can help when applying for other things like mortgages and loans.
- Cashback – Cashback credit cards reward consumers with money back on money spent. They work by paying you back a percentage of whatever you spend on the card, typically between 3 – 5%. If you regularly make purchases with your credit card this can be a particularly rewarding way to manage your money.
- Low APR – Many credit cards will offer great deals for a period of time to entice consumers, like a year of interest free credit. Low APR – annual percentage rate – cards skip out on the flashy introductory offers and instead offer a fixed APR over time that tends to be lower than the average credit card. Many people opt for this type of card to just get on with it; if you don’t want to switch cards for new deals as they come along, this kind of card is a great alternative.
Choosing the right credit card for you
When looking for a new card, it’s worth considering how you plan to use it – consider what kind of purchases you’ll be making and how you intend to pay for your purchases. Using the web to browse for cards is a great way to see what’s available and to understand and compare the benefits of each individual card; websites like Money Supermarket and Compare the Market allow you to compare different cards against one another and browse the variety of what’s on offer.
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