Understanding the pros and cons of each type of credit card can help you find the best one for you. Here’s a quick rundown on some of the different categories.
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 – that’s the money you owe – from one month to another. While these cards have a lower interest rate, you may have to pay an annual fee.
Some credit cards offer cashback or other rewards for everyday spending, like air miles or shopping vouchers, when you use them. They may have a higher interest rate or an annual fee, so try to work out whether the rewards will outweigh the costs.
Some cards offer periods of 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.
Some cards offer 0% interest for a fixed time period for balance transfers from other cards. These allow you to transfer the debt for a small percentage fee of the amount you're transferring. This can be helpful if it means you’ll pay less interest and fees overall.
Like the 0% purchase card, this 0% interest period will end – so, ideally, you should try to 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.
If you have little, or no, credit history because you’ve not borrowed much in the past, then these cards can help you build your credit score. 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.
If you travel a lot, a travel credit card can make it cheaper for you to spend money overseas. They usually don’t charge a fee for making purchases or withdrawing cash overseas.
Travel credit cards tend to have good exchange rates and some may offer reward points for spending. Interest rates may be higher than other types of cards, but you can avoid interest if you pay off your balance in full each month.
A money transfer card lets you move money from your credit card into your current account, for a fee. You may consider a money transfer credit card if you wanted to pay off an overdraft, for example. This is different from a balance transfer credit card, where you move debt from one credit card to another.
HSBC doesn’t currently offer money transfer credit cards.
Taking out a credit card is a big decision and it’s important to make sure you’re aware of all the benefits and trade-offs of any cards you’re interested in.
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