Types of Credit Cards

Getting ready to apply for a credit card?  There are all types of credit cards that can help you with your needs.  Once you determine your purpose and define what you want to use the card for you’ll be able to find the type of credit card that works best for you.  To help you out, here are the main types of cards and generally how they work:


Rewards Credit Cards

There are all types of rewards cards out there.  If you are a traveler, there are those types of cards that pay you airline miles or hotel points.  Other types of rewards cards allow you to earn points for using your card that you can use to purchase all kinds of rewards.  Generally the minimum standard for rewards credit cards is 1 point per dollar spent.  My wife has one of these rewards cards, it’s the Disney credit card.  She gets a Disney reward dollar for every hundred dollars she spends.  It’s at about that minimum of 1%, but she’s saving those rewards to earn a trip to Disneyland.

types of credit cards

Balance Transfer Credit Card

A balance transfer credit card, or sometimes referred to as 0 interest credit cards are considered tools in my book.  These types of credit cards are used to help you get a low interest rate for an introductory period, which changes to a standard rate thereafter.  They are great for lowering your interest rate and helping you pay down your debt, but be careful that you read the fine print.  Credit card companies like to lure you in with that low interest, but if you make a mistake and pay late, watch out!  The rate often increases to over 20% or more, causing you to lose all you saved.


Cash Back Credit Cards

With most cash back credit cards you get a minimum of 1% back.  Depending on the card you select you may get 2% or even 3% depending on where you make a purchase.  Some offer higher percentages at gas and grocery stores.  Some cash back credit cards change the higher rewards for shopping at certain locations each quarter.  If you are looking for a cash back credit card you should probably be able to pay off the balance each month.  If you can’t, you will most likely lose the reward you are earning by an offsetting interest charge you get on your purchases.


Secured Credit Card

A secured credit card is designed for those who are trying to build their credit.  Sometimes there are those who are just getting started and have no credit and there are those who may have a bad history and are trying to rebuild. A secured credit card works the same as a standard credit card except that it’s secured, meaning you have to put a deposit in your account to assure the bank the card will be paid.  Rest assured though that after your balance is paid and you want to close your account you will get your deposit back.


Student Credit Cards

Heading off to college soon?  You might want to consider one of those student credit cards.  Usually there are offers for these types of credit cards all over the campus.  They are designed for students and often the credit card companies have benefits designed for students.  Most of the time they tend to have lower limits and are designed to help you with those small expenses as you are in school.  Beware though as the credit card companies won’t mind catching you in their credit card trap leaving you with a balance that is hard to pay off with its high interest rates.


Business Credit Cards

As a business owner you probably already know the importance of cash flow and liquidity.  Whether you need a way to keep the orders and inventory moving or are just looking to take advantage of special benefits offered only to business owners, business credit cards can fill the gap.  They generally offer higher limits to take care of the ongoing business expenses.  Depending on the credit card company you may have to pay off the balance each month.  Make sure you understand the benefits of the card before you apply.


Whichever type of credit card you decide on make sure you review the applications carefully and compare credit cards one with another to find the best one that works for you.  Plan how to use your new card and set some smart goals to make sure you stay out of debt.

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