What are the Differences in the Various Types of Credit Cards?

Convenient, compact and always reliable, credit cards are undoubtedly the perfect partner to shopping in the 21st century. As online retailing escalates and consumer services are becoming more and more streamlined and efficient, a credit card has become an essential must-have for a fast-paced modern lifestyle, and choosing the right one is critical.

There are several usual varieties of credit card available, with each provider often offering their own take on the classic examples. However, browsing through the hundreds of credit cards on the market, it can be daunting to choose the right one for your lifestyle. Each card has its own advantages and disadvantages, and many come with some serious perks, but it is important to understand the basics first.

Credit cards work on an interest basis, whereby consumers pay interest on their purchases, based on an initial rate. Anyone that's ever shopped for a credit card will be aware that interest rates fluctuate hugely from provider to provider, with the lower the rate signifying the lower monthly payments.

However, these days it's common to get an 'interest free' card which often give up to a year before the card owner has to pay any interest at all. These are particularly popular with consumers looking to carry out a balance transfer; that is transfer the balance from one card to another, offering a better interest rate or terms.

With a low or no interest credit card, more of your monthly payment actually goes towards paying off your debt, rather paying off the accrued interest, so it's possible to save hundreds or even thousands of pounds by simply switching to a lower interest offer.

However, credit card companies are obviously savvy to consumers' reasons for choosing their cards, so to make money back the lowest interest periods are usually only temporary with 12 months being standard before the rate may rise to the normal APR rate.

Some cards are attractive due to a low interest rate or long grace period, but for others, what makes them stand out is the tempting initiatives on offer. Credit cards which offer rewards, like cash back or even goods, are usually dubbed 'rewards credit cards'. These cards are usually given to the consumer who not only shops diligently on their card each month, but also pays it off in good time, and even in full.

If the user doesn't pay their card off in full each month, the 'reward' element of the card can soon become meaningless. The obvious advantages of having a card that rewards good use is that the consumer gets something back for their custom, which is rare; and this could be anything from travel vouchers, points to spend online or even cash.

In short, your money can go further with a well-handled rewards card. However, many rewards credit cards features overly-inflated annual fees which can end up eating into your accrued rewards, and a high interest rate is usually in place too; another incentive to pay the card off completely each month.

Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.