Credit card types

A balance transfer credit card can be a good option if you have existing debt with high interest rates. These cards allow you to shift your debt onto them for a fee and offer a 0% or low interest rate for a set period. This means you can avoid paying interest while repaying the balance.

Depending on your credit limit, you can also transfer multiple credit card balances onto one card. Having one manageable monthly payment can make it easier to stay on top of your debt.

With a balance transfer credit card, you’ll need to:

• Keep in mind that you can’t usually transfer a balance between two cards from the same banking group.

• Check the length of the introductory period and the interest rate that applies after it ends.

• Be confident you can pay off the debt within the 0% or low interest period, or you’ll start building up interest on your balance. Interest rates are often a lot higher after the introductory period finishes.

• Make sure the balance transfer fee doesn’t outweigh the savings you’ll make on interest. Transfer fees can typically range from 2-4% of the amount transferred, which can really add up on larger balances.

• Avoid spending on this card, as the promotional interest rate usually only applies to the balance you’ve transferred and not new spending (though some cards offer 0% on both balance transfers and purchases).

Find out more: compare balance transfer credit cards

0% purchase credit cards offer a fixed 0% interest period on spending. This can be ideal if you need to spread the cost of a larger item over time without paying interest.

Just remember that:

• Even though you’re not being charged interest, you still need to meet the minimum monthly repayments or you could damage your credit score and lose your 0% rate.

• Once your promotional interest-free period ends, you’ll start getting charged interest on any remaining balance. This interest rate is usually a lot higher, so aim to clear the debt entirely before this kicks in. If this isn’t possible, consider shifting the debt to a 0% balance transfer card.

• You could be charged fees for withdrawing money, spending on the card while abroad, or going over your credit limit.

Find out more: compare 0% purchase cards

A credit builder card is specifically designed to help those with no or poor credit history. They're easier to get approved for than other credit card types.

Spending on a credit builder card and consistently making repayments on time can help build a healthy credit history and show lenders you can be trusted with credit, even if you’ve previously struggled with debt problems or never borrowed before. This can make it easier to get approved for other cards or forms of credit (such as a mortgage) in the future.

Keep in mind:

• Credit builder cards are aimed at borrowers considered to be a higher risk by lenders, so can often come with stricter conditions. Read the T&Cs carefully.

• You might only be offered a small credit limit, usually between £100 and £1,500.

• Interest rates can be much higher than other types of cards, so always pay your balance in full each month to avoid building up interest.

Find out more: compare credit builder cards

A rewards credit card or cashback credit card can be a great option if you pay off your balance in full each month and want to earn perks for your spending. They offer cashback, points, or travel rewards whenever you use them. You can then redeem these rewards on things such as shopping or flights. You could also get extra benefits such as insurance or access to exclusive events.

Before choosing a rewards or cashback credit card, it’s important to know that:

• These cards often have a higher interest rate than other credit cards. If you don't clear your balance in full each month, the interest you pay could outweigh the value of the perks.

• Some cards will charge a monthly or annual fee which reduces the overall value of your rewards or cashback.

• There may be restrictions on how and when you can earn or use your rewards.

• You might only get sign-up bonuses such as points or cashback after spending a minimum amount.

• Avoid spending more than you’d planned just to earn more points or rewards, as this builds up unnecessary debt.

Find out more: compare rewards credit cards or cashback credit cards

A good travel credit card usually offers excellent exchange rates on spending, no foreign transaction fees and allows fee-free cash withdrawals (usually up to a set daily limit). Some also offer rewards such as air miles or cashback on overseas spending.

With a travel credit card, you’ll need to:

• Pay off the balance in full each month or the interest you build up could overshadow any savings on foreign transaction fees and exchange rates

• Check whether there are limits on the amount of cash you can withdraw, or number of withdrawals you can make per day

• Bear in mind that most travel cards charge interest on cash withdrawals from the day you take it out, so even if you clear your balance when you receive your statement you'll still pay interest

• Watch out for any hidden charges or fees for using the card

• Let your lender know about your travel plans to help avoid your card being blocked.

Find out more: compare travel credit cards

A 0% balance transfer and purchase credit card (also known as a dual credit or combined card) combines the best of both worlds, offering 0% interest on both balance transfers and new purchases. They sometimes also offer extra perks, too.

With a balance transfer and purchase card, be aware that:

• The length of time you get 0% interest on balance transfers might be different from that for 0% on new purchases. Make sure you’re clear on when each 0% period ends to avoid paying interest unnecessarily.

• You’ll need to pay a transfer fee to move your balance across from another credit card.

• If you miss a payment, you could lose your promotional interest-free rate. You’ll then be switched to the lender’s standard rate, which is often much higher.

• There could be added costs such as cash withdrawal fees, foreign transaction fees, and charges for spending above your credit limit.

Find out more: compare 0% balance transfer and purchase credit cards

A money transfer credit card lets you move money across from your credit card into your bank account at 0% or low interest.

These funds could then be used to pay off an expensive overdraft or cover other cash expenses when a credit card isn’t accepted.

With money transfer credit cards:

• You’ll usually have to pay a transfer fee, which can be up to 5% of the amount being transferred

• You might be able to get a 0% interest deal for a set period. But you’ll need to keep up with your repayments to hold onto that 0% rate

• Aim to clear the balance before the 0% deals ends or you’ll start paying hefty amounts in interest

• Using the card in other ways, such as spending, might rack up interest.

Find out more: compare money transfer credit cards