Credit Cards

Credit cards have been around for many years and facilitate easy lending over the short to mid term as well as a safe and easy way to manage outgoings. Credit card companies have hundreds of types of card for all types of customer.

Types of credit card:

General credit cards
Credit cards with no emphasis on offers or particular type are commonly offered by almost all high street and online banks and are most commonly offered as a basic option for unsecured debt.

Balance transfer credit cards
Balance transfer cards allow customers to move balances interest free for a designated period of time. This means that the total/part of the debt attracts no new interest for a set number of months. New purchases and cash advances may attract interest so make sure you check the terms of the offer. Your existing credit card provider may charge interest or a fee for moving a balance.

Low-interest credit cards
Low interest cards fall into 2 camps. The first is the introductory low or zero interest rate type. These cards offer lower interest for a set number of months and then the rate will increase to a standard variable rate. The second type of low interest rate card is one that has a fixed term low rate from the start of the term. By taking low introductory rates customers can spread the cost of purchasing over a set number of months. If your circumstances change you could get stuck with a costly bill which means you need to consider your options.

Credit cards with rewards
Some credit cards give customers rewards in the form of free gifts, vouchers or cash based on the amount spent per month. The rewards are normally monetary or points based and may come with min or max spend amounts so be sure to check the terms of the deal.

Travel/airline credit cards
Airmiles cards give air miles in the form of a credit. Airmiles credit cards have a variety of different terms that could mean they are not right for every customer. It is important that customers check the amount of points required to exchange for a ticket and check to see if there are any restrictions on use. Like all credit cards read the small print to avoid disappointment.

Cash-back credit cards
Cashback cards do exactly what they say, offer you a percentage of your spend back as cash. The amount is normally based on a percentage and is typically in the low single figures. It is important to check to see if cashback is offered on all purchases and if so is there any limit or minimum spend to claim the cashback. Also check how and when cashback is given.

Bad credit credit cards
For customers with limited credit history or bad credit previously. Bad credit credit cards often have a much higher interest rate to reflect the risk associated. Bad credit cards are often called credit builder cards. These cards are not designed for severe credit issues such as bankruptcy or customers with an iva.

Prepaid credit cards
Prepaid credit cards are not actual credit cards as the amount available on the card to spend is determined by how much is topped up on it. They work similar to a prepaid mobile phone only customers use the card to spend on products and services instead of calls. Prepaid cards are used as expense cards and are often used abroad to keep normal cards safe.

Student credit cards
Student cards are designed for people who have little or no credit history and are normally offered by high street banks as part of a student bank account. Student credit cards often come with a small limit that increases as the student progresses through education.

Benefits and drawbacks of Credit Cards:

Credit cards have some key advantages over a debit card:

– Allow people to spend first and pay the bill at a later date
– Help spread the cost of expensive items
– Have added security on purchases

Credit card disadvantages:

– Can be an expensive form of credit
– Limits and lending period may not suit all circumstances
– High costs for defaults