Different Types of Credit Cards
There are hundreds of credit cards spread across dozens of credit card issuers. The types of credit cards on the market range from basic or "plain vanilla" to
premium cards with lots of benefits.
Standard or "Plain-Vanilla" Credit Cards offer no rewards. They're also uncomplicated and relatively easy to understand. The
standard credit card allows you to have a revolving balance up to a certain credit limit. Credit is used up when you make a purchase
and made available again once you've made a payment. A finance charge is applied to outstanding balances at the end of each
month. Credit cards have a minimum payment that must be paid by a certain due date to avoid late-payment penalties.
Balance Transfer Credit Cards: While many credit cards come with the ability to transfer balances, a balance transfer credit card
is one that offers a low introductory rate on balance transfers for a period of time. Balance transfer offers vary in the
promotional interest rate - some are as low as 0% - and length of the promotional period. The lower the promotional rate and longer
the promotional period, the more attractive the card is - but you'll often need good credit to qualify.
Rewards Credit Cards: Just as the name indicates, rewards cards are those that offer rewards on credit card purchases. There
are three basic types of rewards cards: cashback, points, and travel. Some people prefer the flexibility of cashback rewards, while
others like points that can be redeemed for cash or other merchandise. Travel rewards cards remain a favourite among frequent
travellers because of the ability to earn free flights, hotel stays, and other travel perks.
Student Credit Cards are those specifically designed for college students with the understanding that these young adults often
have little or no credit history. A first-time credit card applicant would generally have an easier time getting approved for a student
credit card than another type of credit card. Student credit cards may come with additional perks like rewards or low interest rate on
balance transfers, but these aren't the most important features for students looking for their first credit card.
Charge Cards do not have a preset spending limit and balances must be paid in full at the end of each month. Charge cards
typically do not have a finance charge or minimum payment since the balance is to be paid in full. Late payments are subject to a
fee, charge restrictions, or card cancellation depending on your card agreement.
Secured Credit Cards are an option for people who don't have a credit history or who have damaged credit. Secured cards require
a security deposit to be placed on the card. The credit limit on a secured credit card is typically equal to the deposit made on the
card, but it could be more in some cases. You're still expected to make monthly payments on your secured credit card balance.
Subprime Credit Cards are one of the worst credit card products. These credit cards are geared toward applicants who have a
bad credit history and typically have high interest rates and fees. While approval is often quick, even for those with bad credit, the
terms are often confusing. The Federal government has made rules regarding the amount of fees subprime credit card issuers can
charge, but the card issuers often look for loopholes and ways to skirt these rules. Despite the unattractiveness of subprime credit
cards, some consumers continue to apply for the cards because they cannot get credit elsewhere.
Prepaid Cards require the cardholder to load money onto the card before the card can be used. Purchases are withdrawn from the
card's balance. The spending limit does not renew until more money is loaded onto the card. Prepaid cards do not have finance
charges or minimum payments since the balance is withdrawn from the deposit. These cards are not actually credit cards and they
don't directly help you rebuild your credit score. Prepaid cards are similar to debit cards, but are not tied to a checking account.
Limited Purpose Cards can only be used at specific locations. Limited purpose cards are used like credit cards with a minimum
payment and finance charge. Store credit cards and gas credit cards are examples of limited purpose credit cards.
Business Credit Cards are designed specifically for business use. They provide business owners with an easy method of keeping
business and personal transactions separate. There are standard business credit and charge cards available.
http://credit.about.com/od/creditcardbasics/tp/credit-card-types.htm
