Types of Credit Cards and How to Choose One That’s Right For You
Credit cards are indeed very convenient. They’re not just easy to get but they are also very convenient to use - and a lot more safer to carry than cash.
Everyday, you are probably bombarded with various credit card offers from your mailbox, from the stores you frequently shop, from the internet, or directly from the banks and credit unions. They can be very attractive at times even if you already own one, and they can be very tempting,too especially to consumers who frequently shop and travel a lot since credit cards allow you to have a continuing balance of debt - subject of course to interests being charged. And with the recent diverging technology, credit cards have become the easiest and fastest way for people to make purchases on the net and almost everywhere they go.
However, having a credit card can also pose a big problem if you don’t know how to manage yourself well on the way to use it.
Simply because the reality is - everytime you use a credit card, you’re borrowing money. And everytime you borrow a particular amount of money, you'll have to pay it back - if possible, on time or otherwise, you will also have to pay back its growing interests later on.
So if you’re the type of consumer who will regularly carry a balance at the end of each month, you will end up paying more in interest than you did for the things you purchased with your credit card. On the other hand, if you’re the type who knows how to pay your credits regularly and on time, you can always keep using a credit card – for good, and perhaps with a good credit rating.
"Money can't buy happiness, but it can buy you the kind of misery you prefer." ~Author Unknown
Now if you’ve finally decided to get one for yourself, for your spouse, or for your older children, then it's very important for you to know that there are various types of credit cards available in the market nowadays for you to choose from. Among the major types are:
Standard cards – these are the most common among the types of credit cards as they can easily provide you some amount of credit and let’s you to easily transfer balances into the card. However, most standard cards may not provide you with lots of options and can even surprise you with interest rates that are far beyond your imagination.
Premium cards - these cards usually offer good incentives and benefits beyond that of a regular credit card. Gold and Platinum cards for instance, are Premium cards which offer cash backs, reward points, travel upgrades, and other rewards to its consumers – though they can also have higher fees. Both Premium and Standard cards have specific types of credit cards available. Among them are the student credit cards, zero percent interest cards, and travel cards.
Specialty cards - these are designed to a special or particular group of consumers such as the student credit cards which are best recommended for students use.
Secured credit cards - these can be a good option for those who don’t have a credit history. A security deposit is usually required on the card with a credit limit that’s equal to the amount of the deposit made. Most Secured credit cards have revolving balances - depending on the purchases and payments you’ll make.
Guide to Choosing Credit Cards: Know the Different Types
As you can see, credit cards aren’t the “one size fits all” thing. That is why there are several types of it designed to suit every individual’s different financial needs.
So before you’ll start filling up the forms and finalizing your credit card application, familiarize yourself first with the many types of credit cards so you'll be guided on how to choose one that suits best for you or for the other members of your family.
Below are different types of credit cards you can choose from which are sorted out in the following categories:
- Business credit card – designed specifically for business use, corporate executives and business owners are usually provided an easy way of keeping their business and personal transactions separate with a business credit card. A certain fee is usually associated with this type of credit card and the grace on purchases is usually shorter. Business credit cards may or may not have a credit limit – and if there is, the credit limit given is usually high which makes it very attractive to big or small business owners. Rewards come in cash backs and earnings points on all business-related purchases including mileage points for business-related travels.
- Student credit card – a good choice for high school and college students, the student credit cards have less interest rates usually reward cash backs on most student purchases like food, books, clothing, and even on entertainment such as movies and music. Some student credit cards also let the students to earn points for certain student purchases that are redeemable for a certain period.
- Prepaid credit card – this type is almost similar to debit cards, except that it is not tied to a checking account. With prepaid credit cards, the cardholder is required to first load money on the card before it can be used and purchases will only be withdrawn from the card's balance. Prepaid credit cards usually don’t have finance charges or minimum payments since the balance will only be withdrawn from each deposit.
- Airline credit card – a good choice for travelers who often fly in the same or different airlines for their work and business-related travels, or even just for pleasure. The rewards you’ll get from an airline credit card are usually mileage credits out of every dollar you spend.
- Gas credit card - like the airline credit card, this type gives a cash back for every gasoline purchase from a specific or from any gas station. Sometimes, gas credit cards may also give a smaller percentage back on other non-gas purchases.
- Cash back credit card – also known as rebate credit card, this type usually gives you a percentage of the purchases you made back as cash. Purchases made from department stores, shops, restaurants, and travels apply this, though they mostly require you to have a good credit in order to qualify.
- Reward credit card – this type of credit card usually gives incentives such as airline mileage points. For instance, everytime you spend a particular amount from your credit card will entitle you to earn points or miles that you can redeem later on when you travel.
- Balance transfer credit card – if you are carrying debt from your other credit cards, the balance transfer credit card would be the right choice for you so that you can save on various interest rates from all your credit cards by consolidating all your debt together into just one card.
- Low Interest credit Card – just as it speaks for itself, this type of credit card offers a low fixed annual percentage rate or a low introductory annual percentage rate. It usually works best for people who regularly carry balance on their credit cards. Some low interest credit cards also give cash backs or airline travel miles for every purchase made or for every dollar spent.
- No annual fee credit card – while there are credit cards that will charge you with an annual fee just for using a credit card, the no annual fee credit card promises a “no-yearly fee” for using it.
- Instant approval credit card – you can get this type of credit card instantly – just within minutes or even seconds especially if you have a good credit. You can easily apply for instant approval credit cards by filling up a form and mailing it or you can also just apply online and you will immediately be answered in no time.
- 0% APR credit card – since most credit cards usually offers different Annual Percentage Rate (APR) out of your purchases, cash advances and balance rates, the 0% APR credit card offers 0% interest for most of its introductory period or over a certain period.
Tips for Choosing Your First Credit Card
Getting Your First Credit Card
Now that you have already familiarized yourself with the different types of credit cards, you’ve probably already identified one that best suits your financial needs as well as your lifestyle. But before you’ll finally grab your pen and fill out the application form, you might need to consider asking yourself these few important questions:
"The safest way to double your money is to fold it over and put it in your pocket." -Kin Hubbard
Am I applying for the type of credit card that suits me best?
Think carefully. You might probably want a credit card with a low annual percentage rate, low or no fees, and perhaps a credit limit that won’t get yourself in trouble. Try to also consider your spending as well as paying habits.
What is the credit limit and how is the finance charge calculated?
Make sure you'll know these things before you'll finally submit your credit card application form.
How much are the fees?
Its important that you should know the amount of any fees involved such as the annual fee, late fee, and over-the-limit fee as well as the circumstances under which the fees are applied.
How long is the grace period?
This is the amount of time you have to pay your balance in full before a finance charge is added so it’s very important that you should learn this beforehand.
What’s the credit card’s Annual Percentage Rate (APR)?
The annual percentage rate or APR, is the percentage applied to balances that you carry beyond the grace period. The higher the APR, the higher your finance charge will be when you have a revolving balance and the more you'll pay for using your the credit card. Most credit cards have a different APR for purchases, balance transfers, and cash advances. Make sure you know the APR for each.
What are the rewards?
Most credit cards let you earn cash backs, free travel and some other perks just for mainly using your credit card. Therefore, it’s important that you should know the amount of purchases you have to make to receive the rewards that you can actually use. Also, make sure you have a good credit score and pay your balance every month.
Finally, once you start using your credit card, try to study your spending patterns and habits as well as carefully track down your credit card records which include payment due dates, charges, fees and interest rates made at the end of each month.
Also, if you're getting your first credit card, it would be wiser for you to get one with a low credit limit while you are still trying to familiarize yourself with the responsible use of your credit card.
Having one or at most three credit cards would be ideal for the more credit cards you'll have and you actively use, the harder it will be for you to manage your payments later on. Still, everything else depends on your ability to manage your credit cards. However, for as long as you know how to manage the use of your credit card wisely and carefully, having one - or even two or three credit cards would be more likely to give you advantages than serious financial trouble later on.
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