There are hundreds of credit cards available across many credit card issuers. The first step in choosing your first credit card is to determine the type of credit card you want based on your needs. The types of credit cards available range from basic cards with no perks to premium cards with many benefits and rewards.
Standard Credit Cards “Plain-Vanilla”
Standard credit cards, also known as “plain-vanilla,” are the basic credit cards, offering no perks or rewards. They are also relatively easy to understand. You might choose this type of credit card if you want a card that is not complicated and you do not care about earning rewards.
A standard credit card allows you to have a revolving credit line up to a certain credit limit. Credit is used when you make a purchase and more credit is made available once you make a payment. Finance charges are applied to the outstanding balances at the end of each month. Credit cards have a minimum payment that must be made by a certain due date to avoid late payment penalties.
Balance Transfer Cards
While many credit cards come with balance transfer capabilities, a balance transfer card is one that offers a low introductory rate on balance transfers for a specified period. If you want to save money on a high-interest balance on your current card, transferring balances is the best way to do that.
Balance transfer interest rates vary – some go as low as 0 percent, but these often come with specific conditions such as a fee for each transfer. The lower the promotional rates (and the longer the promotional period), the more attractive the card becomes. However, you often need to have good credit to be eligible.
Reward Cards
As the name implies, reward cards are those that offer rewards on credit card purchases.
There are three basic types of reward cards: cashback, points, and travel. Some people prefer the flexibility of cashback rewards, while others enjoy points that can be redeemed for cash or other goods. Travel reward cards remain popular among frequent travelers due to the ability to earn free flights, hotel stays, and other travel perks.
Student Cards
Student cards are designed specifically for college students with the understanding that these young individuals often have a poor credit history or no credit history at all. Credit card applicants for student cards generally have an easier time getting approved for a student credit card than for other types of credit cards.
Student credit cards may come with additional benefits such as rewards or a low-interest rate on balance transfers, but these are not the most important features for students looking for their first credit card. Typically, students must be enrolled in an accredited university to qualify for a student credit card.
Charge Cards
Charge cards require the cardholder to load money onto the card before using it. Purchases are deducted from the card’s balance. The spending limit is not replenished until more money is loaded onto the card.
Charge cards do not have finance charges or minimum payments because the balance is withdrawn from the deposit you made. These cards are not actual credit cards and do not directly help you rebuild your credit score. Charge cards are similar to debit cards but are not linked to a checking account. Many people use them as a way to stay within budget.
Limited Purpose Cards
Limited purpose cards can only be used at specific locations. Limited purpose cards function like credit cards with minimum payments and finance charges. Store credit cards and fuel credit cards are examples of limited purpose cards.
Cards
Business
Business credit cards are designed specifically for business use. They provide business owners with an easy way to keep business and personal transactions separate. There are standard business credit cards and charge cards available.
Even for a business credit card, personal credit history is taken into consideration, as the issuer of the credit card still needs individual responsibility for the credit card balance.
Frequently Asked Questions (FAQs)
What is the best type of rewards credit card?
The best type of rewards credit card will depend on how you spend your money and what types of benefits make sense for you. If you rarely leave home, for example, a credit card that offers airline miles or hotel points as rewards may not be suitable for you, but it could be a great option for someone who travels often. If you’re unsure about what type of rewards you want, you can always start with a cash back credit card.
What is the interest charged on different types of credit cards?
The interest charged on your credit card will depend on a number of factors, including the card itself, the issuer of the credit card, and your credit score. The average interest rate on credit cards was 20.66% in April 2022.
Source: https://www.thebalancemoney.com/types-of-credit-cards-960255
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