Types of credit cards

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

It's a good idea to compare credit cards to understand the ins and outs of each type. This can help you find the best one for you. Here's a quick rundown on some of the different categories.

A rewards card offers rewards for everyday spending. These credit card reward points can be redeemed for a range of goods and services, such as shopping vouchers and flights. They can also be used for discounts on family days out, restaurants and hotel rooms.

You can often earn rewards on a wide variety of transactions on the reward card, and sometimes there will be extra rewards for a specific type of spend (e.g. insurance or medical expenses).

The rewards may come at the cost of a higher annual fee, so look at whether you think the benefits will outweigh the costs. If not, you may end up paying more in interest and fees than you earn in rewards.

While credit card reward points can be a smart way to benefit from your normal spending, it's important to always spend within your means and understand exactly how the reward program works.

Banks will offer different rates for earning points for spending and also different things you can use your points for. If you're considering a reward credit card, consider how you'll spend and what you'd like to earn. This will impact which type of reward credit card may suit you best. Here are some examples of how this can work.

A cashback card offers a guaranteed cashback for everyday spending. Like a reward card, this can sometimes be available for a wide variety of transactions on the cashback cards, or targeted towards a specific type of spend (e.g. grocery or phone bills). The cashback may come with a periodic cap, so look at whether you think the benefits will outweigh the costs.

These are cards that you will receive depending on your banking status, such as HSBC Premier. This will have special benefits including rewards across a variety of lifestyle needs and will usually be provided as part of the proposition with no additional annual fee.

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.