A credit card can be a very useful asset if you use it right. They can be used in a variety of situations right from buying goods and paying fees to withdrawing emergency cash loans or renting an apartment. In addition, managing your card responsibly and making your payments regularly can build you a strong credit rating. They also provide you with security in an emergency situation should you ever find yourself in difficulty. Finally they offer an alternative to carrying large amounts of cash on your person, so many people feel more comfortable and secure using a credit card for bigger purchases. Having said that, you do have to be careful when choosing a credit card as an unsuitable card may not offer the benefits to suit you.
Now, choosing a credit card can be made easy if you know what types of credit cards exist in the market, so here’s a brief explanation of the various types to help you choose the one that’s right for your needs..
Balance Transfer Cards
: Go in for one of these if you are getting charged a high rate of interest on your existing credit card. They generally offer an interest free period between 6-18 months on your balance transfer. Although these cards are ideal for people who want to save some money on interest, you need to read the terms and conditions to be clear on the particulars such as the length of the interest free period and any annual fee.
Low APR (Annual Percentage Rate) Cards
: These cards can come in the form of an introductory low APR rate that goes up slightly after a certain time period, or cards that carry a lifetime low APR. These cards are just right for people who are trying to reduce their monthly outgoings.
Frequent Flyer Cards
: These are known also as airline credit cards or airmiles cards and reward the holder with points whenever they make a purchase on the card. These points are accumulated as airmiles and can then be exchanged for flights to the equivalent of the miles they have collected. Foe example the more airmiles you collect, the further you can fly for free! These cards are great for frequent flyers, but do checked for how many miles can be accumulated for every dollar spent, how many minimum miles are required to make a redemption, and finally the time frame within which the miles have to be redeemed.
Rewards Credit Cards
: These too enable the cardholder to accumulate points for each purchase on the card, which then can be redeemed. Dependent on the card type this can be a discount on gasoline, entertainment, specified stores etc. Credit card companies team up with product manufacturers for these goodies and the offers keep changing, making this card suited well to those who shop regularly.
Cash-Back Cards
: These are another type of reward card but specifically designed for cashback. This is where a small percentage of your purchase is awarded back to you as cashback. The amount of cash that is given back usually ranges from 1-5% depending on the card and the purchases made. This cashback is then given back to you at the end of the month. There’s a great way to benefit from these cards called credit card stoozing. Best suited to those who clear their balance in full each month.
Secured Credit Cards: These type of cards are secured by a deposit and generally used for those who have a poor credit history and would like to begin to repair it. Such cards can only be used for purchases equal to the amount of the deposit. Alternatively, some companies may accept a personal asset as collateral instead of a cash deposit, but be careful when considering this type.
Prepaid Credit Cards: These are just like any other prepaid item, just like a mobile phone prepaid scheme. You pay the amount up front and can use the card until the balance is used up, after which you have to top up the balance again. These cards usually do not carry any financial charges but may carry a small annual fee.
Business Credit Cards
: These cards are just right for small and medium business owners who can use these cards exclusively for business purposes. Generally these cards come with a high credit limit and allow a business owner to keep his personal and business expenses separate. Of course, these cards often carry the usual benefits such as low introductory APR, rewards, benefits etc.
Student Cards
: These cards teach students on how to go about building a good credit history, and can really help the creditworthiness of students in later years provided they use the cards wisely. As such these cards do not carry the frills of other cards such as rewards.
This is just a brief introduction to the types of credit cards you can find in the market today. There are a few common rules you should think about regardless of the card type you are looking for. Firstly you should think carefully about the type of credit card that will suit you best. Secondly, be responsible. Don’t overspend and stay within your financial limitations. Finally make certain you maintain your payments. If you run into trouble at any point make sure you let your provider know. They will be happy to help you out rather than have you miss a payment! You can read more on the types of credit cards available here.
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Posted on Friday, March 26th, 2010 at 4:06 pm
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