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Types of credit cards

Credit cards can be a convenient way to pay for a range of things, but different credit cards can be used for different purposes.

Understanding the ins and outs of each type can help you find the best one for you. Here’s a quick rundown on some of the different categories.

Low rate card

A low rate credit card typically offers a lower interest rate on purchases. This type of credit card can be useful if you think you may have to carry a balance from one month to another. While these cards have a lower interest rate, there may be an annual fee you need to account for.

Reward card

Some credit cards offer cashback or other rewards for everyday spending, like points to spend on flights or shopping vouchers. This can sometimes be available for a wide variety of transactions on the card, or targeted towards a specific type of spend (e.g. household bills) and offering a more generous rate of reward. The rewards may come at the cost of a higher interest rate or an annual fee, so look at whether you think the benefits will outweigh the costs.

0% purchase card

Some cards offer periods of charging 0% interest on purchases. These can be useful if you plan to buy a big ticket item and pay for it upfront, giving you a fixed period of time to repay without being charged interest.

Keep in mind that once the 0% interest period ends the purchase interest rate will change. Make sure to look at this so you know what you’re in for down the track. 

Balance transfer card

Some cards offer 0% interest for a fixed time period for balance transfers from other cards. These allow you to transfer existing debt from different credit cards for a small percentage fee of the amount you're transferring. This can be helpful if you will pay less interest/fees overall than keeping any debt on your existing card/s. 

Like the 0% purchase card, this 0% interest period will end so it’s ideal to try and clear your debt before it does. It’s also worth looking at what the rate will change to so you know what you’re in for over the longer term.

Credit builder card

If you have little, or no, credit history then these cards can help you build your credit history. Interest rates may be higher than other types of cards, but you can avoid interest as long as you pay off your balance in full each month.

Keep in mind

Taking out a credit card is a big decision and it’s important to be sure you’re aware of all the benefits and trade-offs of any cards you’re interested in.