Credit cards can be useful financial tools when they are used correctly. They can assist any time an urgent need for cash arises such as car repairs or family emergencies. When applying for a new credit card, there are several factors to consider.
Individuals who have never established credit in the past need to understand more about the different types of cards out there. And those who already have several card accounts may need some assistance with finding the perfect new card for their current financial situation.
Consider All the Different Types of Credit Cards Available
It’s easy to become overwhelmed when there are so many different types of credit cards out there. This list can help consumers find out more about the different features available with each type of card.
Standard Credit Cards – These are the credit cards, which are the most common and available from most financial groups. These cards are unsecured, meaning that there is no security deposit required to be approved. The annual percentage rate can vary with this type of card. Standard credit cards include…
Balance Transfer Cards – With this card, users can transfer the balance from a high-interest card to this one with a much lower interest rate, saving them money over time.
Low-Interest Cards – This card offers a very low annual percentage rate that eventually goes up to an average APR. It allows users to make a big purchase and pay it off over time with little or no interest added.
Credit Cards with Rewards Programs
Reward cards allow users to gain incentives every time they make a purchase. The more often the card is used, the more rewards they are entitled to. The rewards can be in the form of cashback on purchases or points that may be used for discounts. Rewards cards can include:
Cash Back Credit Cards – This card allows users to earn cash rewards for making their everyday purchases. Most cards allow a person to earn around 1% of their total purchase. There are some cards that offer a higher cashback amount. This is a good choice for individuals who are good at paying off their balance every month.
Reward Points Credit Cards – Similar to credit cards that offer cashback, rewards points cards let users earn points over time that can be used for various items such as gift cards, plane tickets, hotel accommodations jewelry, electronics and more.
Travel Points Cards – Travel points cards may sometimes be branded with a specific hotel chain or airline. The points earned go towards discounts on accommodations or flights. Cards that offer frequent flyer miles can also be placed in this category. They often have a higher annual fee, which makes them best for avid travelers instead of the everyday consumer.
Retail Points Cards – This type of card is branded with a major retailer such as Amazon or Disney. The points accumulated are often doubled when the user buys something from the co-branded merchant like the Disney Store or Amazon.com. The interest rates are often higher with these cards, but they can be useful for those who frequently shop the co-branded retailers.
Gas Cards with Rebates or Rewards – Gas rewards cards are either general or specific to a particular brand such as Shell or BP. General cards will provide the same benefits with every gas brand while those that are brand specific may give extra incentives when used at a particular location. Users typically receive a 1 to 2% rebate on everyday purchases and up to a 5% rebate on gasoline purchases.
Credit Cards for People with Bad Credit
It can be easy for someone’s credit to go from good to bad. Missing just a few payments can cause the balance to add up quickly. The good news is that there is a way to improve credit scores and ratings by using one of the following credit repair cards.
Secured Credit Cards – With a secured credit card, collateral is required before approval. The security deposit is predetermined by the company and is often equal to or greater than the credit amount received.
Prepaid Credit Cards – Prepaid credit cards are not credit cards, but they can be used and accepted by retailers in the same manner. Users reload the cards and determine how much cash is added to the balance. There is a usually a small monthly fee for the use of the card and may also be a daily spending limit.
Specialty Credit Cards
A specialty credit card is designed for unique users such as students or a business professional using company funds. Here are a few examples…
Business Credit Cards – Business credit cards are used by business owners and professionals. They have the same features as traditional credit cards such as rewards and low introductory rates. But these cards come with advantages such as additional cards for employees to use, higher credit limits and expense management reports.
Student Credit Cards – Many college students could benefit from using a credit card, but most do not have any credit history to help with the application process. Student credit cards are designed for individuals enrolled in a four-year college or university. They can help students manage their finances wisely and learn how to responsibly use credit.
How to Choose the Right Credit Card to Suit Your Needs in 4 Steps
No two people will have the same financial needs. Therefore, choosing a credit card will be a different experience for everyone.
The first step is to perform a free credit check. This allows applicants to know if they should apply for a standard card, or if they are eligible for a card with more benefits.
The next step is to decide which card is needed, such as one for damaged credit, one that offers cashback, or a rewards card.
Applicants should then narrow down their choices by asking themselves a few questions like:
- “Will this card help me build my credit?”
- “How fast can I earn rewards?”
- “What can I use the reward points on?”
- “Can I afford all the additional fees?”
Apply for a card that will provide the highest value overall. Whether that is a credit limit that automatically increases, no late fees or penalty fees, or lowers required spending to obtain rewards. Applicants should focus on the benefits that are most important to their financial future.