Have you been wondering what the best types of credit cards are for you? We have compiled a list of the various types of credit cards. This is what you need to know about them before applying for them.
Standard/Vanilla Credit Card
A standard credit card also known as a plain vanilla credit card is your most straightforward offer. The credit limit depend on the cardholders creditworthiness, but overall you need little credit history to qualify for this type of credit card. The revolving balance and finance charge apply to the outstanding balance at the end of each month. A minimum payment is due each month to avoid late fees. It has a lower interest rate than rewards cards. While it doesn’t have any rewards it is a good option to learn how to use your credit responsibly.
Balance Transfer Credit Card
A balance transfer credit card may be a good option for you if you have existing credit card balances or loans with high interest rates. A balance transfer card offers you a low interest rate. Often times as low as 0% for an introductory period usually between 6 and 18 months. You are usually charged a one time fee or percentage to transfer the balances onto the card. You will need good credit to be eligible for this type of offer.
Rewards Credit Card
If you have good to excellent credit and travel frequently rewards credit cards are the types of credit cards for you. Offering rewards such as cashback ranging anywhere from 1% to 2% annually. Points can be redeemed for cash, merchandise and travel- flights, hotel, rental cars, perks and upgrades. They offer rewards used at restaurants, gas and grocery and want to take the place over your debit card. Take advantage of the introductory bonus many of these cards are offered with. You’ll get a surge in points for large purchases in the first three months. A rewards card will improve your credit as you should carry little to no balance with this type of card. A tip is to look for a card that rewards purchases you are already making so you are not racking up a bill on unnecessary items.
Charge cards are different from credit cards in that they have no preset spending limits, and the balance must be paid in full at the end of each month. There are no finance charges or minimum payments since you are paying in full each month. You will need good credit to qualify for this type of card. This gives people spending flexibility and there are great rewards attached with this type of account. This is not the card for you if you are unable or unwilling to pay the balance in full and the end of the month as the consequences are catastrophic to your FICO score. Late payment results in heavy fees and restrictions to your account. There are annual fees associated with charge card accounts ranging from $95 to $450. The only types of credit cards that are charge cards in the United States are by American Express.
Secured Credit Card
A secured credit card is an option for someone who has no credit history or who has damaged their credit history. This card builds or rebuilds your credit. The way it works is you leave a secured deposit and the amount of your deposit is the amount of your credit limit. There are still monthly minimum payments, and interest rates like a regular credit card and you need to pay on time to ensure good reporting to the credit bureau to build up your credit.
Limited Purpose Credit Card
A limited purpose credit card is a credit card that can only be used at a specific location such as a retail store or gas station. There are finance charges and minimum payments due with these accounts just like any other credit card. The benefits to having these card are store incentives, cash back, zero interest and rewards points. So this may be the card for you in your favorite retail store that offers exclusive promotions to cardholders.
Student Credit Card
A student credit card is offered to students enrolled into a college or university with no credit history. This is for first time cardholders only and an opportunity to start building your credit with an unsecured credit card. Credit limits are usually low to begin with. The approval process is easier than any other type of card for first time applicants with no credit history.
With all of the different types of credit cards available it is important that you are assessing the the risks and rewards with each type of card and choosing a card that compliments your lifestyle best. And with all cards make sure you are paying your bill on time so you are not hurting your credit and building your credit.