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Credit Card Types And How To Know The Best For You

Choosing the right credit card is a decision thats more important and difficult to make than most people think. With the right credit card, youll be able to maximize your card benefits without getting into debt.

Credit Card Types Which One Suits You Best?

Low Interest Credit Card If youre interested in having a credit card only so you can pay for emergency expenses when you run out of cash, this is the best type of card for you.

Reward Credit Card Every time you swipe your credit card, you get to enjoy an equivalent number of points depending on how much youve spent. The points youve accumulated can later be on exchanged for various prizes.

Airline Miles Credit Card This is a type of reward credit card that offers only airline miles as rewards. When you use this credit card to purchase your plane fare, youll be able to enjoy reward miles. Later on, youll be able to use them and get discounted plane fare or fly for free even! The same rule applies for gas credit cards.

Student Credit Card Credit card companies have lately been designing credit card offers exclusively for students. Although accompanied with higher interest rates, these cards often have funky designs and offer special reward programs developed primarily to provide maximum enjoyment for students. Proof of schooling is often required. It helps if youre enrolled in an accredited school and youve got great grades.

Secured Credit Card If youve got bad credit, theres still a chance for you to own a credit cardbut only if youre okay with having a secured one. This type of credit card requires you to make a deposit on your bank account and serves as collateral in the event that you fail to pay off your credit card debt. Your credit card limit may equal or be more than the amount youve deposited.

Prepaid Credit Card This isnt a credit card per se, but it generally works like one. The limit of this card will depend on how much youve deposited in its account. You cant spend more than what youve deposited. Its main difference with a secured credit card is that secured credit cards can have greater card limits beyond the value of its deposit.

Business Credit Card This works just like any other conventional credit card only with a few additional perks that make it extremely suitable for business use. A business credit card can automatically separate personal expenses from business expenditures, facilitating monthly tallies for your taxes. It can also provide expense reports for your business, special rewards for your business, and allow you to provide supplementary cards for your employees. You can also choose to modify the credit limit of your employees if necessary.

Home-Secured Credit Card This works like a secured credit card, but only this time youre using your home as collateral. If you dont get to pay off your credit card debt, you know what will happen to your home, dont you?

Charity Credit Card Think of it as shopping for a cause. Every time you purchase something using your credit card, a small amount of your money will be donated to the charity being sponsored by the credit card company. This is a great way to salve your conscience if you feel guilty about your materialistic tendencies.

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Most of us will assert that the simple act of possessing a credit card can make a person feel a lot more independent than other things.

The truth is you need to be extremely cautious when applying for a credit card, as it is a complex web of fees, charges, and interest rates (not to mention hidden clauses and terms which are not only illegal but also financially dangerous) which can sink you deep in debt.

Apply for a credit card only if you are sure that you will be able to make intelligent use of it in the near future. But first, you will need a layman’s crash course on credit card interest rates before you secure and swipe your card at the first opportunity.

I have found that interest rates are not the same for different applicants. But usually the means for assigning interest rates on an applicant is based on his credit history. Assuming that you have no history of bad credit, you could end up getting a loan at a relatively low interest rate. Alternatively, you would have no choice but to work hard in order to improve your credit.

This may be done the hard way, by taking the brunt of the compromised interest rate which the bank will assign to you, or to choose a plan with a lower credit limit so that the interest rate follows accordingly. There is also the option of the prepaid credit card. But this method of rebuilding credit is hard to secure and it charges even higher interest costs.

Sure enough, there are low interest credit cards or even zero percent interest plans which are available, but as expected, there is a catch: this low interest may not be valid for over a certain period of somewhere between six months and one year. After the expiration of this low interest period, higher rates of interest come into play. For a monthly or annual fee, service alerts are offered, informing the borrower as to when his low interest period is due to expire.

But most times, these are nothing more than gimmicks. They are targeted to work in the short term only.

Some credit cards can also be used in an ATM to take out funds within the credit limit, but the interest is usually charged from the date of withdrawal, and not from the monthly billing date. This means that the issuer gets a higher payback in interest rate from the transaction than usual.

Bear in mind the fact that many credit card providers offer varying rates of interest. So make sure you know what you are getting into. Some may lure you with teaser offers of low rates for a certain period, whereas the regular rates can get as high as 40 percent.

Since there are no fixed regulations concerning interest rates and penalties on late payments, some issuers forfeit the teaser rates if the borrower does not make the payment on time, and replaces it with a penalty interest rate. Some can even be so unscrupulous as to charge interest even if the balance is fully paid on the due date.

Ideally, you should be shopping around for credit cards that are really cheap. But it is not enough to charge low rates. The card should offer terms that would be convenient for the borrower.

Tags: Applying For A Credit Card, Bad Credit, Brunt, Crash Course, Credit Card Interest, Credit Card Interest Rates, Credit History, Getting A Loan, Gimmicks, Hidden Clauses, Interest Costs, Interest Credit Cards, Interest Plans, Interest Rate, Layman, Low Interest Credit Cards, Prepaid Credit Card, Rebuilding Credit, Six Months, Swipe Card

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