Types of Credit Cards in the UK

A guide to the various cards available


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By Cai Bradley
Updated on Wednesday 7 October 2020

With so many different types of credit cards available in the UK, choosing the best one for you can be difficult, which is why we’ve compiled this straightforward guide to the most commonly used credit cards on offer.

Our guide explains the best types of credit cards available and when you might use them, giving you the information you need to make an informed decision on which one(s) to take out.

credit card bundle

What types of credit cards are available?

Credit cards can go far beyond simply funding our daily outgoings, as they can be used for all sorts of things – from collecting reward points, to helping improve your credit rating.

Gone are the days where you would select a credit card based solely on the interest rate and use it for shopping every now and then, as today’s typical credit card user is a savvy consumer with an ever-watchful eye on their personal finance through their credit score.

Understanding their customers’ needs, credit card companies now offer a range of cards for different purposes.

The most popular types of credit cards in the UK include:

You may not have heard of some of the credit cards listed above, but the majority are relatively self-explanatory. To help you fully understand each type, however, here is a breakdown of all the main credit cards in the UK.

0% purchase credit cards

The main purpose of a credit card is to buy things, which makes the 0% interest purchase cards the easiest to understand.

Purchase credit cards usually provide you with an interest-free period for an agreed amount of time when you first take them out, meaning that you will not be charged interest on purchases during that time.

They typically hold the 0% interest for an extended period (anything up to three years, depending on the provider), allowing you to buy something now and pay for it later when you have the funds, without being charged interest (as you might with Klarna or another Buy Now Pay Later scheme).

Be aware that once the interest-free period is up, you may be subject to a reasonably high interest rate, and if you haven’t cleared your debt by this point, it may cost you more than you intended.

You will need to meet the terms and make the minimum payment each month (at least) to retain the 0% purchase rate.

If you wanted to make a big purchase now, with a definite plan in place to clear the balance during the zero-interest period, an interest-free purchase card can be ideal.

Some of the best things to buy with a 0% purchase credit card include:

  • Appliances (white goods)
  • Home repairs
  • Rental cars
  • Holidays
  • Electronics

Pros

Cons

  • Gives immediate buying power now

  • Extended period to pay off large purchases

  • Simple to understand

  • Interest rate at end of 0% period can be high

  • Often expensive to use for withdrawing cash 

Balance transfer credit cards

Balance transfer credit cards are designed to move your debt from one card provider and transfer it to another that’s offering you an extended period of 0%.

This type of card can provide a lifeline for those who are struggling to pay off their credit card debt.

Balance transfer credit cards work by taking the bill from an existing card that has a high interest rate, which is a struggle to pay back, and giving you the breathing room to settle the debt at a more reasonable pace.

Like the interest-free purchase cards, these are best used when you know exactly how you are going to pay off the balance before the interest-free period ends.

Despite the balance being held at 0%, there is often a fee (usually 3% or 5%) for the initial transfer, so be sure to check this with the provider before choosing to transfer your balance.

Pros

Cons

  • Can give instant temporary relief from an imposing credit card debt

  • Often a reasonable rate for additional purchases

  • Interest rate at end of 0% period can be high

  • Can perpetuate bad finance management

Read more in our full guide to balance transfer credit cards.

Credit-building credit cards

Credit building credit cards are legitimate options if you have a poor credit score and want to improve your rating.

They are a positive way of showing banks and lenders that you can manage credit efficiently and make regular repayments, which should lead to a better credit score.

However, with a high interest rate and low credit limits, credit building cards are not a good option for those with reasonable or good credit scores.

Find out more in our guides:

Credit building credit cards must be used wisely – regular use with monthly payments to cover the entire balance is the best way to build a good credit score.

Pros

Cons

  • Often offered to those with poor or struggling credit ratings

  • Good way to build financial standing

  • High interest rates

  • Can damage credit rating further without good money management

Checking your credit score regularly is important, as it provides a general idea of your financial health. Using Checkmyfile, you can check your credit score and report with four of the main credit reference agencies in the UK:

Checkmyfile is free during its 30-day trial period, but it does cost £14.99 per month thereafter. If you decide you don’t want to pay for its services, you can cancel your subscription at any time.

Cashback and reward credit cards

To entice you to their credit card above all others, a number of lenders now offer cards with reward schemes.

These range from simple cashback schemes – where you get 0.25% or 0.5% back from any purchases you make on the card – to the classic ‘air miles’ cards which were extremely popular at the end of the last century.

The value you will get from a reward card simply comes down to how well you value their reward – for example, if you travel often, you will benefit greatly from air miles schemes.

The best reward credit cards include some of the following rewards:

Learn more: The Best Credit Card Rewards

Pros

Cons

  • The rewards

  • A reasonably-rated card for general use

  • Only really valuable to people who make full use of the rewards

Low interest credit cards

Low interest credit cards are relatively self-explanatory – they are credit cards with low interest rates.

Many banks offer low interest credit cards to their customers, but be aware that the interest rate advertised is not always the rate you get.

A large number of customers will get the advertised rate as long as they have a good enough credit score, but others with a lower credit rating may not qualify for it. The lender will adjust the interest rate on offer in accordance with your credit score, so what may seem like the perfect rate on paper can become far less appealing in reality.

Be sure to start building your credit history from a young age and check your credit rating using an online credit reporting site before committing to a provider.

To give yourself the best chance of being eligible for the best low-interest credit cards available in the UK, check your credit score today with Checkmyfile:

Pros

Cons

  • Great interest rates for good customers

  • No non-essential extras

  • Rate you get might not be that advertised

  • Best for those with strong credit ratings

Pre-paid cards

While they are not technically credit cards, pre-paid cards can be useful under many situations, because you can use it to make purchases without worrying too much about your credit record, as you might with a basic credit card.

A prepay card is simply loaded with money that you pay in advance, providing a simple alternative option to those who would rather not use a credit or debit card for everything.

They can be used for online purchases, other digital transactions or when travelling abroad, for example.

Read more: How to Avoid Hefty Credit Card Charges Abroad

Pros

Cons

  • Simple way to get the convenience of a credit card without jumping through the hoops

  • No actual credit or additional bonuses

  • Limited protection from theft or returns

The benefits of using a credit card

The main advantages of getting a credit card include the following:

  • You can buy now and pay later without interest fees with a 0% card.

  • Using a credit card little and often will improve your credit score.

  • Credit cards are protected under the Consumer Credit Act.

  • Many providers offer rewards (air miles, cash back, or loyalty points).

  • Some policies come with extras (travel insurance, airport lounge access).

Credit cards are a very positive way to improve your credit score, allowing you to build up a history which will help towards larger future credit, such as mortgages or car finance.

Read more: How to Improve Your Credit Score

Potential disadvantages of a credit card

You should only take out a credit card if you can do so responsibly, and only use it to the extent that you can comfortably afford to pay off.

If you don’t borrow responsibly and aren’t able to make your repayments on time, you could find yourself facing serious debt issues due to late payment fees and high interest rates, and it could hinder your ability to borrow again in the future.

Credit card protection

All credit cards are protected under section 75 of the Consumer Credit Act, which gives you a strong level of cover should something go wrong with your purchase. You will even be protected if the company that sold you goods enters into liquidation.

This law means that your credit card provider must protect purchases over £100 for free, so you should get your money back if an issue arises.

Should you lose your credit card, at home or abroad, most credit card companies will be quick to get a replacement to you.

How to use a credit card

To get the most out of your credit card, keep in mind the following tips:

  • Keep up with monthly repayments
  • Avoid withdrawing cash
  • Pay the entire balance in-full and on time each month (unless you’ve got an interest-free card)
  • Avoid applying for credit too often
  • Be careful if you use the card overseas (some will charge fees)

Remember, having more than one credit card can be beneficial under certain circumstances, as explained in our guide: How Many Credit Cards Should I Have?

For more information on credit cards, be sure to check out our related guides:


credit cards money management personal finance loans debt member benefits money saving tips

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