In the past, credit cards were pretty straightforward. Each issuer offered just one card with a standard set of features. But today? They’ve evolved dramatically, coming in all sorts of forms with varying interest rates, fees, and reward schemes.

Before you get swamped by the sheer number of credit cards out there, it’s smart to figure out which type will genuinely fit your financial needs and daily life.

Exploring Credit Card Types

So, how do you pick the best card for you? Let’s look at the different categories below and see how they might help you hit your financial goals.

Balance Transfer Credit Cards

Balance transfer credit cards let you shift a high-interest debt from one card to a new one that offers a lower interest rate. The top balance transfer cards often come with an introductory APR period, typically lasting anywhere from 15 to 21 months. The specific terms for these cards can vary quite a bit, so always make sure to read the terms and conditions thoroughly.

Most of these cards require a balance transfer fee, usually around 3% or 5%, though you can find some with no fee at all. Even with a fee, a balance transfer card can be a fantastic tool to save you a significant amount of money, especially if you can clear your balance before the introductory APR period ends.

Some of our top picks for balance transfer credit cards include:

BankAmericard® credit card: Great for balance transfers with a low interest rate.
Discover it® Balance Transfer credit card: Excellent for balance transfers, plus it has rotating bonus categories.
Wells Fargo Reflect® Card: Ideal for a longer introductory APR period on balance transfers.

Intro APR and Low-Interest Credit Cards

Low-interest credit cards can come in a few forms: they might offer a low introductory APR that then increases after a set period, a consistent low fixed-rate APR, or, for those with the best credit, a low minimum APR.

A low-interest card can be really useful if you’re planning a large purchase, giving you several months (sometimes even up to a year) to pay it off with little to no interest. Before you use one, always read all the terms and conditions of the introductory rate so you won’t be surprised by any fees or accumulated interest later.

Some of our top picks for intro APR and low-interest credit cards include:

Discover it® Cash Back: Best for a low interest rate.
Citi® Double Cash Card: Fantastic for an intro APR on balance transfers and double cash back.
Blue Cash Everyday® Card from American Express: A strong choice for families looking to finance a big purchase.

Cash Back Credit Cards

Cash back credit cards let you earn cash rewards on your everyday spending. If you’re looking to get more out of your purchases while earning rewards, these cards essentially give you a rebate in the form of a specific dollar amount on eligible items. Many cash back cards offer a flat rate of rewards, while others provide bonus points in specific categories like dining or travel.

Because cash back programs can be costly for credit card companies, some of these cards come with annual fees, potentially up to £95, though many don’t have one at all. When used smartly, a cash back card can help you earn a good chunk of money over time.

Some of our top picks for cash back credit cards include:

Blue Cash Preferred® Card from American Express: Excellent for cash back on groceries.
Bank of America® Customized Cash Rewards credit card: Best for flexible cash back categories.
Capital One SavorOne Cash Rewards Credit Card: Ideal for cash back on dining and entertainment.

Rewards Credit Cards

Rewards credit cards let you earn incentives for using your card. Points build up for every pound you spend, and you can redeem these points in various ways. Rewards cards typically require a better-than-average credit score for approval. They’re similar to cash back cards in that you accumulate points, but these points can be redeemed for a wider range of items.

General rewards cards offer cardholders a diverse selection of items to exchange points for, like gift cards, electronics, hotel stays, plane tickets, and more. Reward programmes and promotional offers often change, so carefully review a card’s terms and conditions before applying. While some general rewards credit cards come with an annual fee, many don’t. Rewards cards are best suited for people who consistently pay off their balances each month.

Some of our top picks for rewards credit cards include:

Citi Premier® Card: Best for earning rewards on travel and everyday spending.
American Express® Gold Card: Excellent for groceries and dining rewards.
Chase Sapphire Preferred® Card: Stands out for its sign-up bonus.

Business Credit Cards

Business credit cards are designed for business owners and executives, sharing many features with traditional credit cards such as low introductory rates, cash back programmes, and airline rewards. The key difference lies in the additional benefits tailored specifically for running a business.

These perks might include: keeping business expenses separate from personal ones, special business-specific rewards and savings, detailed expense management reports, extra cards for employees, and higher credit limits. Each card varies, and promotional offers can change, so always examine the terms and conditions carefully before applying.

Some of our top picks for business credit cards include:

Bank of America® Business Advantage Unlimited Cash Rewards Mastercard® credit card: Best for flat-rate, unlimited boosted rewards.
American Express Blue Business Cash™ Card: A great business credit card with no annual fee.
Capital One Spark Cash Plus: Ideal for flat-rate cash back for businesses.

Student Credit Cards

Many university students need a credit card but often have little to no credit history, making it tough to get approved for a standard card. Student credit cards are specifically created for those enrolled in accredited four-year colleges and universities, helping them build a credit history right from the start.

Compared to regular consumer cards, student credit cards are typically a bit more basic in terms of rewards, features, and other benefits, but they can still be incredibly valuable. If used wisely, a student can take their first step towards building a solid credit history with this type of card.

Some of our top picks for student credit cards include:

Discover it® Student Cash Back: Best for everyday spending for students.
Capital One SavorOne Student Cash Rewards Credit Card: Ideal for entertainment seekers.
Capital One Quicksilver Student Cash Rewards Credit Card: Great for flat-rate cash back for students.

Secured Credit Cards

Secured credit cards require a security deposit for approval. To get one, you’ll need to put down a predetermined amount, which is usually equal to or more than your credit limit. These cards are specifically for people trying to build or rebuild their credit history.

Cards designed to help rebuild credit often come with lower credit limits (like £250) and sometimes additional fees. Make sure to read the terms and conditions for any extra services before you apply. If you use the card responsibly and pay all your bills on time, you can often ask for a credit line increase later on. The extra fees and lower credit limits are often worth it if a secured credit card helps you get your overall credit back on track.

Some of our top picks for secured credit cards include:

Capital One Platinum Secured Credit Card: Best secured credit card with no annual fee.
Capital One Quicksilver Secured Cash Rewards Credit Card: Great for flat-rate rewards on a secured card.
OpenSky® Secured Visa® Credit Card: Best secured credit card as it requires no credit check.

Travel Credit Cards

Travel credit cards help you earn points and miles that you can use for travel loyalty programmes. These cards let you redeem points and miles earned from your everyday purchases as statement credits towards flights, hotel stays, and other travel rewards.

If you travel frequently for work or pleasure, there are many luxury travel credit cards on the market offering perks like airport lounge access, annual travel credits, and credits for Global Entry or TSA PreCheck. Most travel rewards cards offer new cardholders a welcome offer or sign-up bonus. The most compelling travel rewards cards often come with significant annual fees, though some might waive the fee for the first year.

Some of our top picks for travel credit cards include:

Capital One Venture Rewards Credit Card: Best general-purpose travel credit card.
Capital One VentureOne Rewards Credit Card: An excellent first-time travel credit card.
The Platinum Card® from American Express: Our top pick for a luxury travel card.

Co-branded Credit Cards

Co-branded credit cards operate like standard rewards credit cards but offer rewards specifically tied to one brand, such as an airline, retail store, or hotel chain. For example, co-branded airline credit cards are primarily designed to reward cardholders for booking travel through that specific airline or its partners.

With a co-branded hotel credit card, you can redeem your points for free nights and upgrades at that hotel chain. Because these reward programmes can be expensive for credit card companies, many come with an annual fee. If you don’t travel often, the annual fee might cancel out the benefit of the rewards you earn.

Some of our top picks for co-branded credit cards include:

Southwest Rapid Rewards® Plus Credit Card: Best for frequent Southwest Airlines users.
Amazon Prime Rewards Visa Signature Card*: Ideal for Amazon purchases.
Marriott Bonvoy Boundless® Credit Card: Great for Marriott Bonvoy hotels.

The Bottom Line

Ultimately, the best credit card for you comes down to your individual spending habits and what kind of rewards you prefer. While frequent travellers might get huge value from the perks of travel credit cards, those who prefer staying home might be better off with a simpler cash back credit card that rewards their everyday spending. Take some time to explore your options to find the most useful card for your lifestyle and spending.

What you should know about credit cards

Credit cards demand a significant level of responsibility. Failing to manage them well can quickly lead to accumulating substantial debt and a negatively impacted credit score.

If you’re new to credit cards and feel apprehensive about responsible spending, or if you’ve found it challenging to handle multiple cards, this guide is for you. Keep reading for essential insights that will help you understand every credit card in your wallet.

Navigating the World of Credit Cards

How can you build a positive and beneficial relationship with credit cards? Before you even consider applying for an account, grasp the fundamentals. Understanding the basics—from recognizing different credit card types to comprehending the legal aspects of their use—will empower you to spend wisely from the moment you hold that powerful piece of plastic.

Credit cards broadly fall into two categories: general-purpose cards, which can be used almost anywhere, and private-label retail cards, typically restricted to the issuing store or specific service station.

Most general-purpose cards, including many top-tier rewards cards, are unsecured. This means the issuer extends a credit line primarily based on your credit history and trustworthiness.

Conversely, secured cards require collateral in the form of funds deposited into an account that the creditor can claim if you fail to meet your obligations. Because creditors face minimal risk with secured cards, they are relatively easy to qualify for, making them an excellent option for individuals with damaged or limited credit histories.

There are four primary processing networks for credit cards: Visa, Mastercard, American Express, and Discover. The card issuer’s name—such as Capital One, Chase, or Citi—is typically printed on the front. If the issuer isn’t visible on the front, check the back of your card or refer to your billing statement.

Selecting Your Ideal Credit Card

The best credit card for you will entirely depend on your individual financial needs.

Do the calculations and estimate how much you anticipate using your card for purchases—covering everything from groceries, fuel, and dining out to travel, streaming services, and your mobile phone bill. If you generally pay your balance in full each month, a rewards card is a sensible choice. However, if you foresee carrying a balance from month to month, prioritise a card with a low ongoing interest rate or a 0 percent introductory APR.

If your main priority is building or repairing your credit rather than earning rewards or spreading out purchases, a secured card can be instrumental in maintaining a positive credit history.

The Optimal Number of Credit Cards

There’s no universally “perfect” number of credit cards one “should” possess. Nevertheless, for most consumers, a couple of general-purpose cards should adequately meet their needs.

If you’re considering a retail card, ensure it’s for a store you frequent and that it offers a meaningful incentive for its use. Bear in mind that retail cards typically carry higher interest rates compared to general-purpose cards.

Your decision to acquire more than one card should be driven by your specific financial goals and needs. If you can manage multiple cards responsibly, it could prove beneficial in the long term.

Demystifying Your Card’s Interest Rates

Credit card interest rates can vary dramatically—from limited-time 0 percent balance transfer offers to rates as high as 30 percent. The average credit card interest rate currently stands at 18.90 percent.

Creditors consider various factors when setting your annual percentage rate (APR), including your credit score, income, assets, current debt load, recent credit inquiries, payment history, and prevailing economic conditions.

So, who receives the best (lowest) rates? Consumers with established and positive credit histories.

The Binding Contract: Your Credit Card Agreement

It is crucial to read your credit card agreement meticulously. Once you sign, you enter into a legal contract and consent to the terms set forth by the issuer.

These terms typically include:

Credit Line/Limit: This is the maximum amount you are permitted to charge, encompassing any interest and fees.
Annual Percentage Rate (APR): This is the interest charged on carried-over balances. The agreement usually stipulates higher rates for late payments, exceeding your credit limit, balance transfers, and cash advances.
Interest Calculation Method: Most issuers compute interest charges by averaging the daily account balance, then multiplying that figure by the periodic rate (APR divided by the number of days in a year).
Fixed or Variable APR: Fixed-rate APRs maintain consistent interest rates. Variable APRs, conversely, are linked to an index (often the prime lending rate, which is tied to the federal funds rate set by the Federal Reserve) and therefore fluctuate.
Grace Period: The grace period is the number of days (generally between 20 and 30) you have to pay your full balance before interest begins to accrue.
Fees: Common fees include those for cash advances, balance transfers, late payments, exceeding your credit limit, and sometimes an annual fee.

Be aware that most creditors reserve the right to alter any of these terms—so always check your mail for adjustment notices.

Annual Fees and Your Monthly Due Date

Every time you make a charge, you are essentially borrowing money.

However, because credit cards offer a revolving balance option, you are not obliged to repay the entire loan immediately. As long as you make at least the minimum requested payment, you can carry the remainder over to the next month. It is strongly advisable to avoid making only the minimum payment, as interest will be added to the outstanding balance.

The Takeaway

Ultimately, there’s no hidden secret to using credit cards wisely. If you strategically choose cards with 0 percent introductory APRs or those with no annual fee—while consistently paying your bill in full each month—charging can essentially be free.

The key is to always meticulously monitor your spending to ensure your balance doesn’t become a burden at the close of each billing cycle. And if your card comes with a robust rewards program, you can actually gain an advantage by maximizing your earnings.

Types of credit cards compared