There are dozens of credit card issuers who are responsible for the distribution of hundreds of different credit cards. The first thing you should do when selecting your first credit card is to determine the type of card you want to get based on your specific requirements. There are many different kinds of credit cards available today, ranging from the standard card that doesn’t have any extra features to the premium card that has a lot of additional features and benefits.
Credit Cards That Are Considered to Be “Ordinary” or “Vanilla”
Because they do not come with any perks or bonuses, standard credit cards, often known as “plain vanilla” credit cards, have earned this nickname. In addition to that, comprehending them is not too difficult. If you want a credit card that isn’t complicated and you’re not interested in collecting rewards, you can consider getting this kind of credit card instead.
A normal credit card gives you the ability to carry a load from month to month up to a certain credit limit. When you make a purchase using credit, some of the available credit is deducted, but more credit becomes available after the payment has been made. At the conclusion of each month, a finance charge is computed and applied to any sums that remain unpaid. The minimum payment that is required for credit cards must be paid in full on the due date in order to avoid incurring late payment fees.
Credit Cards that Allow You to Transfer Your Balance
A balance transfer credit card is a credit card that gives a low introductory rate on debt transfers for a limited period of time. While many credit cards come with the ability to transfer balances, a balance transfer credit card is one that offers this rate. A balance transfer is an excellent option to consider if you already carry a balance on one or more credit cards that are subject to a high interest rate.
Balance transfer interest rates vary widely; some are as low as 0%, but they usually come with strings attached, such as a fee for each transfer.
The more desirable the card is, the lower the promotional rate will be (and the longer the promotional period will be), respectively. However, in most cases, having decent credit is required in order to qualify.
Credit Cards That Offer Rewards
Reward cards are credit cards that, as their name suggests, offer points or other forms of compensation for use on purchases.
There are three primary categories of rewards cards: cash-back, point-based, and travel-based. Some people favor the versatility that comes with cashback benefits, while others favor point systems that allow them to exchange their points for cash or other types of products. Because they give cardholders the opportunity to earn free flights, hotel stays, and other travel incentives, travel rewards cards continue to be a popular choice among frequent travelers.
Credit Cards Intended for Students
Student credit cards are credit cards that are created with the premise that college students typically have a limited or nonexistent credit history. These credit cards are designed exclusively for college students. Getting approved for a student credit card is usually easier than getting approved for other types of credit cards, especially for people who are applying for their first credit card ever.
Even though student credit cards may come with additional bonuses such as rewards or a low interest rate on debt transfers, these are not the most significant aspects for students who are looking for their first credit card. In order to be eligible for a student credit card, students often need to be enrolled full-time at a college or university that is regionally or nationally accredited.
Charge cards do not have a spending limit that is predetermined, and all amounts must be paid in full at the end of each billing cycle.
Due to the requirement that the full balance be paid off each month, charge cards normally do not include a financing charge or a minimum payment requirement. Depending on the terms of your card agreement, a late payment could result in a fee, restrictions on your ability to charge, or even the deletion of your card.
Most of the time, you will need to show proof of good credit history in order to get a charge card.
Credit Cards That Require a Deposit
People who either don’t have a credit history or have a credit history that’s been damaged have the option of applying for secured credit cards. A security deposit needs to be loaded into the card in order to use a secured card. The credit limit on a secured credit card is normally equal to the amount of the deposit that is made on the card. However, under certain circumstances, such as a substantial default, such as failure on a mortgage payment, the credit limit may be higher than the amount of the deposit. It is important to keep in mind that you are still responsible for making the required monthly payments on the amount on your secured credit card.
Credit Cards with Poor Credit Ratings
Credit cards for those with poor credit ratings are among the most problematic types of credit cards. As a result, the interest rates and fees on these cards are frequently quite high. Even for those with poor credit, approval is frequently granted in a short amount of time. Nevertheless, the terms are frequently unclear. The federal government has established regulations governing the maximum amount of interest and fees that subprime credit card issuers are allowed to collect from their customers. Despite these regulations, card issuers frequently hunt for loopholes and other ways to get around them.
Some consumers continue to apply for subprime credit cards despite the fact that these cards do not appeal to them since they are unable to obtain credit through any other means. Because of how things are, you will have to move forward at your own risk.
Cards Paid in Advance
Before the card may be used, the person who owns the card must first add money to the account associated with the card. The balance on the card is reduced by the amount of each purchase. The spending limit won’t be raised again until more money has been added to the card.
Because the balance is deducted from the amount that you have already deposited, prepaid cards do not have finance charges and do not require minimum payments. These cards are not credit cards in the traditional sense, and using them will not directly assist you in re-establishing or improving your credit score. Prepaid cards are quite similar to debit cards, with the primary difference being that they are not linked to a bank account. They are utilized by a significant number of people as a method for remaining fiscally responsible.
Cards with a Restricted Use
Credit cards with limited use are only accepted at certain retailers and restaurants. The use of limited-purpose cards is comparable to that of credit cards, complete with a required minimum payment and interest fees. A couple of instances of restricted-purpose credit cards include store credit cards and gas station credit cards.
Commercial Use of Credit Cards
Credit cards for businesses are tailored to the requirements of commercial transactions. They make it simple for business owners to keep their personal finances and business finances separate, which is a significant benefit. There are the typical credit and charge cards available for use in business.
Even if you are applying for a credit card for your company, your personal credit history will be looked at. This is because the company that gave you the credit card needs to know who will pay off the balance in the end.
Questions That Are Typically Asked (FAQs)
Which category of rewards credit card is considered to be the most advantageous?
Your spending habits and the kinds of benefits that make the most sense for you will determine which form of rewards credit card is the best option for you. For instance, if you don’t leave the house very often, getting a credit card that offers rewards in the form of airline miles or hotel points wouldn’t make much sense for you, but it might be a fantastic option for someone who travels very frequently. You should always begin with a cash-back credit card if you are unsure of what other types of benefits you are interested in receiving from your credit card.
What kinds of interest are levied on the many credit cards that are available?
Your credit score, the credit card issuer, and the type of card you have are all elements that will play a role in determining the amount of interest you are charged on your credit card. In April of 2022, the average interest rate charged by credit card companies was 20.66 percent.