There are so many different types of cards available now, that it can be almost impossible to keep on top of which one does what and how much they’re costing you! Credit card, store card, debit card, pre-pay card… So what are they all?

Debit Cards

Quite simply, the card associated with your bank account. They are not credit cards as they take the money straight out of your bank account as you pay for something. Many current accounts also issue debt cards that act as cheque guarantee cards and most of the time, they work in cash machines to make cash withdrawals.

Credit Cards

Credit cards do not take the money straight from your bank account when you use them to pay for something. Instead, you are essentially borrowing that money and you repay it at a later date – often with interest. You’ll often get a monthly statement showing exactly what you owe on your credit card and the minimum monthly repayment is £5 or 3% of the balance (whichever of those two is the greater). Credit cards can usually be used in cash machines too, but you will generally pay quite a fee for a cash withdrawal on a credit card.

Charge Cards

These are frequently confused with credit cards. However, with a charge card, you will receive a monthly bill that you have to settle there and then in full and, on top of that, you will probably be charged an annual fee. Many of them come with predefined maximum spending limits.

Store Cards

Store cards are somewhat like credit cards – except that they are issued by one store and can often only be used to make purchases in that store. As with a credit card, you will receive a monthly statement and will have a minimum repayment to make. Again, interest often applies.

Pre-Pay Cards

These are sometimes known as “electronic purse cards,” and are simply an alternative to cash. You load money onto the card and then use the card to make payments. This is ideal for those who are a little uncertain about entering details online for cards that they have associated with a bank account. In addition, they are ideal for those whose credit rating is too poor to be able to obtain any other type of card. This is the newest of the cards on this list.

That should clear up some confusion – though the way we pay for things is ever changing and by this time next year, there’ll probably be something else new!

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