There are a whole variety of different types of credit cards available which can make choosing the right one a very confusing experience. In order to help you decide, listed below is a useful breakdown of the various types of credit cards available.
Standard Credit Cards
Standard credit cards work as you might expect – with the cardholder using the card in order to pay for goods and services up to their agreed credit limit. Repayments are made once every month which must at least cover the agreed minimum repayment. These repayments will cover not only the capital borrowed but also the interest and extraneous charges payable upon the amount borrowed, usually referred to as annual percentage rate. Standard credit cards should not be confused with debit cards where transactions are charged directly to your current account.
Charge cards work in the same way as normal credit cards with one difference, the balance of the charge card must be paid off in full every month. Charge cards are most regularly issued to either businesses or to consumers who may have had a bad credit history in the past. If you have a poor credit history then a charge card might be offered to you because the full monthly repayments would preclude spiralling debt. Charge cards are also popular with the wealthy consumer as this sort of card can offer credit practically without boundaries. It should be noted that if the cardholder does not pay off their balance once a month as required then they could incur very hefty fines.
Platinum and Gold Credit Cards
Platinum and Gold credit cards are only available to applicants who earn a certain level of annual income and, accordingly, offer a number of benefits to the cardholder which will vary from provider to provider. Higher credit limits are usually associated with these types of credit card. If you fall into a higher income bracket and have a good credit history then you will be able to benefit from the advantages that such a credit card offers.
A variation on the credit card, a store card will allow the cardholder to make purchases with a particular retailer on a credit account. The cardholder can then effectively buy products without paying for them until a later date, when it is most convenient for them. You will often be offered discounts on the goods that you buy with a store credit card but it should be noted that the interest charged on such cards are usually extremely high. This is an area that you must be sure to look into with prudence if you are considering obtaining; you might find that the disadvantages outweigh the advantages.
Reward Credit Cards
Reward credit cards, or loyalty cards, operate in a similar way to charity cards except that the main recipient of any benefits is the credit cardholder. Incentives may include cash bonuses, points, discounts and Air Miles. With this type of credit card it is important that you think logically about the rewards being offered, and work out exactly how much you will need to spend on your credit card in order to reap the benefits.
Charity Credit Cards
Charity credit cards offer all the usual benefits of a regular credit card but also donates a particular percentage of what you spend to the charity to which it is affiliated. These charity donations are made at no extra cost to the cardholder and the card allows consumers to help a good cause simply by spending money in the way they always would. You can obtain credit cards for a whole range of diverse charities as well as organisations such as football clubs or universities.
About the author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.