On the hunt for a credit card? Find out which is best for you.

By Kimberley Bailey

On the hunt for a credit card? There are plenty to choose from but it's important you know which ones suit your needs.

Credit cards get a bad rap, especially from the likes of wary parents who are worried you’re going to pull a fast one and run away to India to “find yourself”, simultaneously running up a huge debt thanks to the card’s interest rate, all attributed to their address. However, of course, credit cards aren’t all evil, but not all of them are for everybody.

Standard credit cards

This piece of plastic is about a simple as it gets when it comes to credit cards and probably the most well-known. They’re good for general purchases which you’re not able to stump up the money for upfront. You have to be 18 years old and fit the minimum requirements in terms of credit criteria, which will depend on which bank you’re applying to get a card from. How much you’re allowed to borrow (the credit limit) is also laid out by the bank issuing the card; HSBC’s criteria and limit is likely to be different to Barclays’ for example. Standard credit cards are unsecured so you don’t need to put down a deposit proving that you can pay back the money, but obviously that money does need to be paid back and the interest rate on those payments depends on whether you’ve got a low interest credit card (exactly as it sounds) or a balance transfer card (more on that later). It’s worth establishing. The main advantage and disadvantage of this type of credit card are allied; it’s easy to use and pretty easy to get hold of, so this means it’s not uncommon for users to forget the reality that they’re spending money they don’t actually have. Running up debts on that cash can be as easy as splashing it.

Keep an eye out for the APR (Annual Percentage Rate) which is essentially the interest you pay on the purchases made with your card (unfortunately you can’t borrow money for free), and each issuer will have varying APRs so you’d need to check out those rates before you choose which issuer to go with. Some are also variable, so the rate could change after you’ve signed on the dotted line. This means that if you haven't read the not-so-fine print then you could think that for the next gazillion years you only have to pay back 0.5% interest on your purchases (because that's what the card initially promised) but if the card has variable interest then that 0.5% which you love so much could jump to 1.5%, and you need to be aware and prepared for that.

Reward cards

Exactly what it says on the tin; when you spend money on these cards you get a reward. These rewards can be points, discounts or cold hard cash. Points add up and you can trade them for things like air miles, car rentals, merchandise etc. Sounds great, but a disadvantage of having a reward card is that it’s likely to influence your purchases and even how much you spend.

Some also hold fees, akin to interest rates, so don't always assume that rewards are all you’re stumping up, because fees on the things you're buying are likely to be stumping up too.

Restrictions and rules on these cards vary so it’s important to get to grips with what exactly you’re earning reward wise, and how. For example, some cards have a certain window in which you can spend the points you've earned, some of the rewards are only redeemable online or in certain ways laid out by the card provider, some reward cards carry an annual fee and so on.
If you’re the kind of person who can pay off their balances regularly (and don’t let the fees add up) then a reward card can allow you to enjoy some pretty nice perks, such as points off in your favourite stores or airport lounge passes.

Secured credit cards

These are handy if you’re looking to rebuild a not-so-great credit history (which could be stopping you from getting car insurance or renting property), but they do have relatively high annual interest rates because you’re viewed as a more ‘risky’ card holder. This is also why you need to provide a security deposit (the amount determined by the issuer), and this collateral is basically anything of monetary value that you own; jewellry, a car, or a boat (if you’re that lucky). If you want to make small and responsible purchases which you’re able to repay (plus interest) on time then a Secured credit card is a smart move in getting you back in the credit rating good books. But keep Secured credit cards’ higher interest rates in mind.

Balance transfer cards

A balance transfer card allows you to transfer all your debts onto one card, giving you more time to repay your debts. Some of these cards will give you an interest free period, alleviating the pressure of the constantly adding to your debts through interest. If you would like more information on balance transfer cards, please read our in depth blog post right here.

Credit building credit cards

Credit building cards, are cards specifically designed for people with either very little or poor credit history. They are often have lower limits in terms of the level of credit available to you. They also come with a slightly higher rate of interest due to this perceived risk involved in lending to those with little or poor credit history. But if you are looking for a way to build up your credit score, credit building cards can certainly be a good option. If you would like more information about credit rebuilding products please read our full blog post here.

Top takeaway

It’s all about getting the right card for your needs and ensuring you can manage the repayments. Comparison websites are a great tool in getting to grips with what type of card offers you what you want.


By Kimberley Bailey

Kimberley is a freelance journalist investigating the world of personal finance for giffgaff Money, while exploring and trekking through Asia. She adores Prince, Louis Theroux and Persian rugs.

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