Types of credit card: what each one is for and what it costs

Credit cards are the form of credit people in the UK most often turn to for essential household bills, according to debt charity StepChange¹. But "credit card" is really a family of products with very different jobs: one type exists to move existing debt to a 0% rate, another to spread the cost of a purchase, another to earn rewards on spending, and another to help people build a credit history from scratch. Picking the wrong type for the job is one of the most common and most expensive mistakes a cardholder can make.

The headline numbers are worth knowing up front. The longest 0% purchase cards currently offer up to 26 months interest free, while the longest 0% balance transfer deals run to 38 months². Most balance transfers charge a one-off fee of 2% to 3% of the amount moved³. Every purchase between £100 and £30,000 on a credit card carries legal protection under Section 75 of the Consumer Credit Act⁴.

The main types of credit card and what each one is for

A credit card is a payment card that lets you borrow money up to a set limit, which you then pay back in the future⁶. Within that broad definition, the market splits into several distinct types, each designed around a different need:

• Balance transfer cards exist to move existing card debt onto a 0% or low rate so it can be paid off faster.
• 0% purchase cards exist to spread the cost of new spending over an interest-free period.
• Money transfer cards move cash from the card into a current account, usually for a fee of around 4%².
• Rewards, cashback and air mile cards pay something back on spending, and some charge an annual fee.
• Credit-builder cards offer small limits to people with a poor or thin credit history.
• Travel cards are designed for use abroad, with reduced or no foreign transaction fees.

There are also hybrid products. Dual credit cards combine the advantages of balance transfer and purchase cards in a single card⁷. And the market itself is broader than the big banks: card issuers include banks and building societies, non-bank specialists, and lenders focused on particular groups such as borrowers with poor credit histories⁸.

The type matters more than the brand. A card designed for balance transfers may charge full interest on new purchases, and a rewards card may charge fees that outweigh what it pays back for someone who does not spend much. The sections below set out what each type does, what it costs and who it tends to suit.

Balance transfer cards: moving debt to a 0% or lower rate

A balance transfer card is taken out to move debt that is already on another credit card. Balance transfer cards typically offer a 0% interest rate for a set period when you move debt onto them from your existing card or cards⁷. The effect is to freeze the interest for a set period, giving you time to clear the debt without worrying about interest piling up⁹.

The point of the exercise is speed and cost. Moving the debt to a card with low or 0% interest could help you pay off the debt faster, because every pound repaid reduces the balance rather than being eaten by interest³. Many balance transfer deals offer 0% interest on the amount you move¹⁰. The longest 0% balance transfer deals currently on the market run to 38 months², and other analysis of the market puts the longest interest-free deals at up to 34 months¹¹.

Two limits shape whether this works for a particular person. First, low or 0% interest credit cards are hard to get without a good credit rating³, so this type is generally for people with an established, healthy credit record. Second, you can only transfer a balance that is within the credit limit of the new card⁷, so a large debt may not fit.

A balance transfer moves the debt, not the habit. If the old card is then run back up, the total debt has doubled rather than moved. Debt charities warn that consolidation of this kind only helps if the underlying borrowing is brought under control, and free debt advice is available from StepChange and other charities before anyone commits to moving debt around¹².

The full guide to balance transfer credit cards covers the process in detail, and balance transfer vs money transfer compares the two ways of moving debt.

Balance transfer fees, and what can be moved

The transfer itself usually costs money. Most credit card providers charge 2% to 3% of the amount you are transferring as a one-off fee³. Citizens Advice puts the typical handling fee at around 2% of the balance¹⁰, and official guidance from nidirect in Northern Ireland confirms that some credit card companies charge a balance transfer fee to take over your unpaid debt, either as a flat fee or as a percentage of the amount transferred¹³. Debt advice guidance adds that most companies charge an initial percentage of the debt to make the transfer¹⁴.

Not every deal charges. Many credit card companies offer 0% transfer fees as a way to encourage applications¹², though these no-fee deals are typically shorter than the longest offers. When comparing deals, the trade-off is usually between a longer 0% period with a fee and a shorter period without one.

What can be moved is limited in three ways. The transfer must fit within the credit limit of the new card⁷. Providers generally will not accept a transfer from another of their own cards, since the purpose is to win debt from rivals. And a balance transfer moves card debt only: to move money into a bank account as cash, a money transfer card is needed, which typically charges around 4%².

To make a transfer, contact the new provider once the account is open. This can usually be done online via the provider's website or app, or through its customer helpline⁷. The dedicated page on balance transfer fees explains how the fee is charged and added to the balance.

0% purchase cards: up to 26 months interest-free on spending

A 0% purchase card charges no interest on new spending for a promotional period after the account is opened. The best 0% purchase credit cards currently let you borrow interest free for up to 26 months, although you will need a good credit rating to get the longest deals¹⁵. Which?'s September 2026 guide to the market gives the same figure: the longest deals on the market currently offer 26 months interest free². An earlier guide, from February 2026, put the best interest-free cards at up to 25 months¹⁶, which shows how these offers move as providers compete.

This type suits a planned, one-off cost: a home improvement project, an essential appliance, a car repair. It does not suit ongoing spending, because anything still owed when the promotional period ends starts attracting the card's standard rate. Most 0% interest deals only last for a number of months¹⁴, and the Financial Conduct Authority's research found that consumers often do not know the APR, credit limit, or in some cases the length of the 0% promotional period they will get before applying⁸.

Two rules make or break a 0% purchase card. First, the minimum repayment still applies each month, typically around 3% of the balance due or £5, whichever is higher⁵. Second, most credit cards offer an interest-free period on what you have bought if you pay off your bill in full¹⁷, so a cardholder who clears the balance every month gets interest-free borrowing anyway, without needing a promotional offer at all.

For context on cost: purchase cards tend to offer a 0% interest rate for a promotional period, which may last between 3 and 20 months¹⁷. A 0% purchase card avoids interest entirely during its offer, which is why the length of the offer and the discipline of the repayment plan matter more than anything else about the card. The page on 0% purchase credit cards goes deeper, and when a 0% offer ends covers what rate you move to.

Rewards and cashback cards: points, cashback and annual fees

Rewards and cashback cards pay something back when you spend on them: points, air miles, or a percentage of the spending returned as cash. Which? compared the fees and interest rates of 137 cards in its analysis of the air mile card market in September 2026¹⁸, which gives a sense of how crowded this part of the market is.

The cost structure is different from the other types. Some cards charge a fee each year for use of the card, and the fee is added to the amount due⁵. Some providers charge an annual fee⁶. Premium cards, often carrying travel and insurance perks, are the most likely to charge one. The calculation for a cardholder is whether the rewards earned on their normal spending exceed the annual fee, and for many spending patterns they will not.

Rewards are usually earned on purchases only. Using the card for anything else is charged differently: a card can have a separate purchase rate, balance transfer rate and cash transaction rate, so taking money out at a cash machine or getting cashback at a till is charged at the cash rate, not the purchase rate¹⁹.

Spending abroad is where rewards cards often lose their shine. Most credit cards add a foreign transaction fee of around 3% on non-sterling purchases and cash withdrawals². You will typically pay up to 2.99% each time you use a credit card abroad, and spending just £5 with a card that charges fees could set you back £1.15, an additional 23%²⁰. A card that earns rewards on spending but charges a foreign transaction fee can cost more abroad than a plain card with no fee. The comparison of cashback vs points reward cards and the guide to rewards and cashback credit cards set out the differences, and using a credit card abroad covers travel use in full.

Credit-builder cards: lower limits of around £100 to £200

Credit-builder cards are designed for people with a poor credit history or no credit history at all. They tend to have a "low and grow" approach, whereby your initial credit limit is very low, say £100 to £200, but increases as you prove you can manage it responsibly². StepChange describes the same structure from the debt angle: cards for people with a bad credit history tend to have a low limit of around £200 and often have a high interest rate²¹.

The trade-off is clear. In exchange for accepting a borrower other lenders would refuse, the card charges a high rate and gives a small limit. Used carefully, that is the point: the card exists to generate a record of on-time payments, not to provide cheap borrowing. StepChange's guidance for people with poor credit scores notes that if you cannot pay in full, you must at least make the minimum payments²¹, because missed payments on a card whose purpose is to build a credit file do the exact opposite.

The catch sits in the application process itself. Any failed application reduces your credit rating, which StepChange calls the "rejection spiral"²¹: apply for cards aimed at people with better histories, get refused, and the refusal itself makes the next application harder. Cards in this category are also where lenders focused on sub-prime borrowers operate⁸, so the market is real, but the terms are the least generous of any card type. The guide to credit-builder credit cards covers the category in full.

Fees and charges that apply across card types

Whatever type of card you hold, the same family of charges applies. The FCA's description of the UK card market lists the fees that can include annual fees, balance transfer fees, default fees, fees for cash withdrawals and foreign transaction fees²². Citizens Advice summarises the practical version: you will usually be charged for going over your credit limit, for using the card abroad and for late payments⁵.

Cash is the most expensive thing to put on any credit card. You may be charged a cash handling fee of around 2% of the amount you withdraw²³, and you can also expect a fee of around 3%, with a minimum of £3, when you take money out of an ATM with a credit card²⁰. Interest is charged on cash withdrawals straight away²⁰, with no interest-free period, and withdrawals attract a higher APR and are recorded on your credit report². Abroad, a foreign transaction fee may be charged on top of the usual cash advance fee²³.

The amount of interest varies between providers, so the same balance can cost very different amounts on different cards⁶. The pages on credit card fees and charges, how interest is charged and withdrawing cash on a credit card cover each of these in detail.

Who can get which card: credit score and income

Providers do not have to give you a credit card. Your application may be refused if your credit score is low or you are not on the electoral roll, among other reasons⁵. Where the refusals bite hardest is at the top of the market: the longest 0% purchase and balance transfer deals are reserved for people with good credit ratings².

The market is structured around this. The FCA's research identified three broad business models: high-street banks targeting upper and middle-prime consumers, direct-sales issuers targeting all consumer groups, and issuers targeting sub-prime borrowers⁸. In practice, that means the main types map onto credit histories:

• Good credit history: the longest 0% purchase and balance transfer deals, and most rewards and premium cards.
• Average or thin history: shorter 0% offers, standard-rate cards, and cards from finance companies and larger supermarket and store chains, which are among the places you can get a credit card⁶.
• Poor or no history: credit-builder cards with limits of around £100 to £200².

Income matters alongside the score, because affordability is what the provider is assessing. The FCA found that consumers do not know what APR, credit limit, or in some cases the length of the 0% promotional period they will get before applying⁸, so the deal advertised is the deal the best-qualified applicants get, not necessarily the deal offered. The guides to applying for a credit card and credit scores and credit reports cover the process, and credit card limits explains how the limit is set.

Section 75 protection on purchases over £100 and up to £30,000

Every credit card purchase carries a legal protection that no debit card has. Section 75 of the Consumer Credit Act provides additional protection for credit card purchases costing between £100 and £30,000⁴. If you paid for what turned out to be bogus goods or services by credit card, and the cost was more than £100 and less than £30,000, the card provider is jointly liable with the seller²⁴. The protection applies even if you only paid for a small part of the cost on the card²⁵.

The limits matter in both directions. A £90 purchase has no Section 75 protection; a purchase of £30,000 or more has none either. The threshold is explained in full on the £100 to £30,000 threshold page.

Where the protection stops:

• It does not apply to charge cards or debit cards²⁶, and Section 75 does not cover goods or services bought with a debit card, charge card or prepaid card²⁷.
• Additional cardholders can lose out: unless the primary cardholder also benefits from the purchase, a family holiday for example, you lose Section 75 protection²⁸.
• Debit cards offer chargeback protection on all purchases, but not Section 75²⁹. Chargeback exists for both credit and debit card purchases³⁰, applies to purchases of any value, but is not enshrined in law and each scheme, run by Visa, Mastercard and Amex, has its own rules³¹.

This protection is the strongest argument for putting a significant single purchase, a holiday, furniture, a used car, on a credit card rather than another payment method. The full guides are at Section 75, chargeback and Section 75 or chargeback.

Missed payments and repeated applications stay on your credit record

Two behaviours damage a credit file regardless of card type, and both are easy to trigger by accident.

The first is missed payments. The missed payments will be recorded on your credit file, and after three or four missed payments the creditor will soon think about sending a default notice if the debt is something like a credit card, and may consider other recovery steps³². On a promotional card this can be doubly costly: missing a payment during a 0% period can lose the offer itself, as well as adding a late fee.

The second is applications. Applying for too many cards or regularly switching cards can affect your credit rating⁵. Each application leaves a mark, and any failed application reduces your credit rating, the "rejection spiral"²¹. Someone who applies for several long 0% deals in quick succession, is refused, and applies again can do more damage in a fortnight than a year of careful repayment repairs.

If payments have already been missed and the debt is unmanageable, free help exists: StepChange, Citizens Advice and other charities provide free debt advice, and the help with credit card debt page sets out the options, with separate pages for debt in Scotland and debt in Northern Ireland. The page on how credit cards affect your credit file covers the record side in detail.