Though they all make look the same, not all credit cards are created equal. There are several different types of credit cards that should be used differently depending on the type of credit card.
Regular credit cards are what you could consider “plain vanilla” credit cards. They don’t have any special features. You simply make charges on the credit card and make the minimum payment each month. You’re billed a finance charge for purchases you don’t pay off before the grace period. You don’t earn any special rewards for the purchases you make.
A rewards credit card is one that allows you to earn rewards on your purchases. Some reward credit cards only give you rewards when you make purchases at certain locations, e.g. a gas station. Other reward credit cards give you rewards for all your purchases. You may earn points that can be redeemed for merchandise and services. Or, you might earn cash back on your purchases. Cash back might be an actual check mailed to you or it could be received as a credit toward your credit card balance.
Retail store credit cards might be a credit card that can only be used in that specific store, or it could be a Visa or MasterCard co-branded credit card. Store credit cards are often rewards credit cards and allow you to accumulate rewards that can be used toward future purchases in that store.
A charge card is a type of credit card that does not have a revolving balance. That means you don’t make monthly payments on the balance. Instead, you have to pay the balance in full by the due date to avoid being charged a penalty. Charge cards often do not have a credit limit, but may charge higher interest rates and fees on unpaid balances.
A secured credit card requires you to make a deposit to secure the credit limit on the card. Your credit limit might the same as your deposit, or it could be a percentage of your deposit. A secured credit card is a good option for consumers with no credit or bad credit who have trouble getting other types of credit cards. A secured credit card that reports to the major credit bureaus can help you build or rebuild your credit to qualify for more traditional credit cards.
Since there are so many types of credit cards, it’s a good idea to explore all your options before applying for a new credit card. That way, you make the right choice about the type of credit card that’s best for you.
Almost everyone carries and uses credit cards. Some folks have a bundle of cards, not because they asked for them, but in response to a flood of unsolicited offers over the past several years. As a result of the recent economic downturn, many people who once paid off their purchases monthly have now been carrying significant balances.
We are accustomed to receiving offers and information regarding credit cards. Most of the correspondence includes a small print-multi page document titled “Terms and Conditions”. Until about September of last year, these documents were relatively benign, and routinely ignored. Since September 2009, almost every card issuer has changed the terms and conditions of card usage in very substantial ways. Interest rates, annual fees, and other fees have been increased almost beyond belief. Because of changes in Federal Law, you received these notices, and were given the right to opt out of the card (canceling), and pay off any remaining balance over time at old interest rates. Most people didn’t read the notices, or, if they read, did not opt out. The result, is that finance charges will increase and escalate in 2010 in accordance with the new rates and fees. Carefully examine your credit card statements over the next several months, and pay particular attention to finance charges. Many people will find it difficult to pay off balances, and will only be able to pay interest. We all need to pay attention to the fine print of our card agreements, and explore ways to avoid interest rates that often exceed 20%.