Types of credit cards you can get - A guide to rewards, travel and more

Hey there, savvy sisters! Are you ready to dive into the exciting world of credit cards in the UK?

I know, I know. Our parents’ generation scared us half to death with the warning of credit cards and being in debt can end up with the bailiffs knocking on the door, but, it’s time to get over our fear.

Credit cards can be a handy way to navigate through life more easily; earning extra cash, rewards, and even building your credit score as you go. Thankfully now, the credit industry is much more regulated than 20/30 years ago, they are also much more advanced and have had to work harder to win customers back – meaning, more goodies for us.

Whether you're looking to benefit from some awesome rewards, explore the globe, or simply build up your credit score, I’ve got you covered. In this blog, we'll break down the different types of credit cards available, including reward cards and their juicy perks. So, let's get started on your journey to mastering the art of plastic power!

Remember, credit cards carry a risk as its essentially giving you money you do not have, so always practice caution when using one. Secondly, to get a credit card, you will need a good credit rating, so always keep an eye on how your credit report is looking by checking it with a credit reference agency, I like to use Experian to get a free report.

As barbie says; life in plastic, it’s fantastic.

Let's get to unwrapping the types of credit cards –

Reward cards

Kicking it off with a firm fav, reward cards serve as exquisite repositories of privileges just waiting to be unlocked. They cater to those seeking an additional touch of luxury during their expenditures, and they’re not just for the rich. Reward cards allow you to benefit from whatever you spend per month, it doesn’t need to be thousands.

Let’s delve into the core aspects of these:

Points cards

The holy grail card for everyday spending, particularly for groceries and other essential items.

How they work: With these cards, each transaction you make accrues points in your favour. These points can subsequently be exchanged for vouchers, gift cards or store credit in participating retailers. Usually, this could be a supermarket or high street shops.

Top Tip: Consider aligning the credit card you choose with your current spending habits. For example, if you always do your weekly shop at Tesco, fill up your car at texaco spend £100 in Topshop once a month, it would make sense to look for a card that has these retailers in their points programme. Make the credit card work for you when you’re choosing it. You’re spending the money anyway, if you spend it on a credit card, you could get more out of it.

Cash back cards

Depending on how your cash back card works, you will either get cash back monthly or annually, this could also maybe be tallied by using a points system which you then turn into cash, or the bank will do the maths of your monthly spending and supply your cash back accordingly.

How they work: Cash back champion cards operate by returning a modest percentage of your purchase amount directly to your pocket. Every transaction becomes an opportunity for a minor financial windfall, granting you a delightful cash infusion.

Top tip: Regularly monitor cash back percentages and any associated caps to optimise your returns, especially for higher-value purchases. Always read the fine print.

Air miles cards

How they work: Wanderlust aficionados, take note! Air miles cards bestow upon you a precious currency – miles – for every transaction undertaken. These accumulated miles can be elegantly redeemed for flights, hotel accommodations, and other travel-related indulgences, effectively transforming your day-to-day shopping into a reservoir for your future adventures.

A lot of travel hackers use this method to get a lot of benefits out of traveling, it’s worth looking into if you’re a sun lover like yours truly.

Top tip: Prioritise travel-oriented expenditures to amass miles swiftly, and explore diverse redemption options to extract maximum value from your accrued air miles.

Travel credit cards

For the globe-trotting enthusiasts among us, travel credit cards stand as an unparalleled gateway to exceptional experiences. The biggest draw for travel credit cards is being able to spend money abroad without the massive fees that our regular bank would charge us, some even allow us to withdraw a limited amount of cash from ATMs with no charge.

Beyond this, and the air miles feature highlighted earlier, these cards present an array of captivating travel-oriented benefits, including:

• A good exchange rate

• Airport lounge access

• Travel insurance

• Hotel and car rental discounts

Top tip: Compare the breadth of travel perks on offer, ensuring they align harmoniously with your travel habits and preferences, if you like to travel with cash, get a card that has great withdrawal terms. If you're only using it as a backup, look for a card that also offers perks such as the airport lounge and travel insurance, so you can maximise your return.

Credit builders

We've all been there – trying to kick-start our credit journey or bounce back from a few bumps along the way. That's where credit builder cards come to the rescue. Designed for those looking to boost their credit score in order to get a mortgage for example, these cards are like your personal credit coaches.

How they work: Credit builder cards typically have a lower credit limit, which helps you keep your spending in check. They're an excellent choice if you're new to credit or have a less-than-stellar credit history. As you make regular, on-time payments, you're demonstrating responsible credit behaviour, which gradually improves your credit score.

Top tip: Set up automatic payments for the full balance each month to build credit while avoiding interest charges.

Balance transfer credit cards

You've got a lingering balance on a high-interest credit card, and it feels like you're stuck in a never-ending interest cycle. Enter balance transfer cards, your ticket to breaking free from those pesky interest charges.

How they work: Balance transfer cards allow you to transfer your existing credit card balances to a new card with a lower or even 0% interest rate for a promotional period. This can be a few months or even up to a year, giving you time to pay off your debt without the burden of high interest rates.

Top tip: While the interest rate is low (or 0%), focus on paying down your balance as much as possible. Be aware of any balance transfer fees, and aim to clear your debt before the promotional period ends.

Purchase cards

You're shopping for a big-ticket item or planning a home improvement project – that's where purchase cards swoop in to save the day. These cards are all about making your planned purchases more manageable and budget-friendly.

How they work: Purchase cards offer a 0% interest period on new purchases, making them perfect for spreading the cost of a large expense over several months. It's like a short-term interest-free loan for your shopping needs, however keep in mind that the interest free period can and will expire. Always double check the term and length of time these promotions are on, and ensure you have a payment plan set up to pay off any big debt before that time expires, otherwise you could be faced with a big interest hike.

Top tip: Create a repayment plan to pay off your balance before the 0% interest period ends. If you still have a balance remaining, you'll be charged interest on the remaining amount.

Throwing in some caution

Credit cards can be a great resource if you know how to use them correctly, but always read the fine print as there may also be some snags to using them.

For example, credit cards aren't usually great for cash withdrawals, unless this is specified on a travel credit card, banks will usually charge you a premium to withdraw cash using a credit card, that's if they even allow it at all.

Another example is if a credit card is giving you perks and benefits for using it, chances are they may also charge you an annual fee, so always check the benefits outweigh the fee if you're planning to pay to have a credit card.

A third thing to look out for is the annual percentage rate, or the interest rate. Some cards may have offers on where the interest rate is low for a set period, but then it does rise after a certain amount of time. Be savvy with this, note this date down if it applies to you and you can close the credit card after this period has ended if you don't want to be stuck with the higher interest rate. Other lenders will always have new deals and promotions on, so always be on the lookout for a new credit card when your timely limited perks come to an end.

Finding your perfect match

So, what's the right credit card for you? It depends on your spending habits and lifestyle. If you're all about earning as you shop, reward cards are your sidekick. For the wanderers, travel credit cards are the way to go. If you're looking to manage existing debt, low interest and balance transfer cards have your back. One thing I would also ensure your card of choice has is a very good mobile banking app, this helps you keep track of your rewards and spending.

Before you dive in, consider these factors:

1. Spending habits: Do you mostly shop online, in stores, or both?

2. Travel plans: Are you a jet-setter or planning a future getaway?

3. Interest rates and fees: Be sure to understand the terms, including annual fees and APR.

Remember, you can have more than one credit card, as long as you keep track of them, use them wisely and always remember to pay them off in full.

How do I get a credit card?

If you’re ready to ride the credit card wave, here's how to snag your very own card and start enjoying the benefits that come with them.

1. Shop around – compare offers from different banks and card providers to find the one that suits you best.

2. Check eligibility – use an eligibility checker to see which cards you're likely to be approved for, they usually give you an instant decision. This helps avoid unnecessary hits on your credit score.

3. Application time – apply for one card at a time to avoid multiple inquiries impacting your credit score.

4. Credit score booster – keep your credit utilisation low (try to use 30% or less of your available credit), pay your bills on time, and check your credit report regularly for errors.

5. Patience is key – building a healthy credit score takes time, so be patient and responsible with your credit usage.

And there you have it, credit card adventurers! A glimpse into the world of UK credit cards, filled with rewards, travel possibilities, and credit-building opportunities. Remember, whether you're a points chaser, a travel enthusiast, or someone simply looking to improve your credit score, there's a card out there with your name on it.

Enjoy the life of plastic!

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The content on this financial blog is for informational and educational purposes only and should not be considered as financial advice. The authors are not licensed to provide financial advice in the UK.

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