These days hardly anyone still carries around cash and instead they have turned to trusty credit cards to make purchases.

This convenient little piece of plastic simplifies your life and is a staple in most wallets. There are so many options available that it sometimes makes it difficult to navigate the plastic maze.

You’re spoilt for choice when it comes to credit cards and all these choices may quickly become overwhelming if you don’t know what you are looking for. Credit cards have a bad reputation when it comes to running up debt, but if you use them responsibly, they can become a great financial tool.

The first step to responsible credit card use is to understand the different types of credit cards available. Some cards come with great rewards such as free gifts, rewards and free travel vouchers among other benefits including low rates and low fees.

Types of credit cards in the UK

There are endless credit card options available but they all fall into a few basic categories. Understanding what each type offers and knowing how you will use the card can narrow down the search dramatically.

Secured credit cards for those with no credit history

A secured credit card is normally a “starter” credit card, perfect for those people that haven’t yet established a credit score. If you have a bad credit score this type of card may be a good option for you. You will be required to pay a security deposit in order for the card to be issued to you. This card will have a limit attached to it. If you default on your payments then the company can claim their money back from your security deposit. Many people use secured credit cards to improve their credit score or raise their scores enough to apply for unsecured credit.

0% Interest credit cards

Benefits of this type of card include a 0% interest on any purchases made within a certain time period, usually a few months. Many credit cards offer a 0% APR as an introductory special offer. This can be a great tool to buy more expensive items without having to add high-interest to its cost. They can become very expensive if you don’t pay off the entire balance before the special offer runs out. Make sure you know what the APR% converts to.

Balance transfer cards

If you have multiple credit cards and are struggling to make payments on them each month then you should consider applying for a balance transfer credit card to consolidate your debt. This will allow you to transfer the balances on your various cards onto one card that offers a 0% APR for a few months. This will save you money on interest and makes your payments easier to manage.

Read the fine print carefully though as many cards require you to pay a balance transfer fee. Some as high as 5%. Once your special offer % has expired, you will be charged the new rate on the entire outstanding amount.

Bonus rewards include collecting rewards points that can be redeemed for special offers, vouchers, gift cards and travel vouchers. Collect more points to unlock bigger and better rewards.

General reward credit card offers

To market and stand out from all the other credit card offers, companies compete with each other to offer the best rewards so that clients are more likely to choose the card they have to offer. You are rewarded when you make purchases using the card.

These rewards points can be personalized according to your individual preferences as they can be exchanged for many different rewards. These rewards are great if you require a flexible option and often include cashback offers, travel vouchers, discounts on merchandise or gift cards and special offers. It is very easy to earn rewards points by making everyday purchases and using the card when you purchase flights or pay for hotels.

Other extra benefits could include travel benefits such as lost luggage insurance, discounts when you convert currency, roadside and emergency assistance plans.

Cashback reward credit cards

The name says it all, these kinds of credit cards offer you cashback rewards in your pocket. There are different options offered by different companies but they all follow the same basic blueprint. Most offer a basic cashback rate on the purchases that you make using the card. Others separate rewards into certain categories or tiers such as spending at the grocery store, amounts spent on fuel, entertainment and other such categories.

The purchases that you make earn you cashback rewards and once you have earned enough, your cash reward can be redeemed. Some companies offer these cards without a monthly fee and if you want to save money then this is a great option to consider.

Credit cards to avoid

Of all the different credit cards on offer, there are certain types of cards that you should avoid if you want to save money rather than add to your debt.

Retail cards should be avoided as these types of cards carry the highest interest rates that are often camouflaged by special introductory offers that see your interest rate skyrocket after a certain date. Retails stores offer these cards to promote brand loyalty, but skip a payment and your interest rate could cause you a major headache financially.

Deciding on the perfect credit card for your needs is easy once you have a basic understanding of what each type has to offer.