Credit Cards

Guide: Personal Finance

Types of Cards

Credit Card

This gives you credit in the true sense of the word. Whatever you purchase is added to your credit account and you are not asked for payment until the end of the month. When you receive your statement you can pay off the whole amount without incurring any interest charges, or pay part of the total and incur interest on the balance. Credit card companies tell you the limit of the amount you can borrow on your credit card.

Debit Card

When you make your purchase the total amount is automatically taken out of your bank account. So you must make sure there’s enough in the account, either actually or within your overdraft agreement, to cover the cost of whatever you are buying. No interest is charged by the banks for providing this facility.

Charge Card

Aptly named, because you usually get charged to have a charge card. The most obvious example is American Express where you pay an annual fee for having the card. When you receive your monthly bill you have to pay it off in full. One of the snags is that a high proportion of retailers do not take charge cards.

Store Card

Works the same as a credit card but can only be used to buy goods from the issuer – High Street retailers are the biggest suppliers of these cards. If you pay the whole bill as soon as you receive the monthly statement all well and good, but beware of the on-going interest rates if you only pay a proportion off. They can be horrendous.

Charity Card

Very similar to a credit card but there’s a built-in feelgood factor because a few pence of each pound you spend goes to a designated charity.

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