Types of Credit Cards – Forbes Advisor


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Different types of credit cards fit different cardholder needs. The right card will help you responsibly achieve your financial goals while providing the best possible value.

Many credit cards are best suited for a specific purpose such as earning rewards, building credit, financing large purchases, helping businesses finance expenses while earning rewards or financing previous credit card debt via incentivized balance transfer offers. Check out our guide below to the many types of credit cards to learn more about which might be right for you.

What Are the Different Types of Credit Cards?

Rewards Credit Cards

When cardholders use a rewards credit card to make purchases, they can earn rewards including cash back, points or miles. Welcome bonuses offer new cardholders the ability to earn a reward for spending a specified amount on a card within a certain period of time.

For people who utilize credit cards frequently or for large purchases, rewards cards can be especially profitable. Travel cards offer those that travel often (or use specific airlines or hotels frequently) additional miles and points that can be applied towards free tickets or rooms, upgrades and status changes, and lounge access and certain travel protections.

For retail-branded rewards cards, the same concept applies: Frequent shoppers at certain retailers will often see the greatest benefit by earning high reward rates or deep discounts when they use the card online with a co-branded retailer or to finance purchases in-store.

Rewards cards also do a good job of incentivizing cardholders. But if you’re trying to limit your credit card usage—either because you’re at risk of carrying a large balance or because you want to limit your spending—a rewards card may not be right for you.

Premium Rewards Cards

Premium rewards cards typically charge high annual fees in exchange for elevated reward earning potential and even more benefits. These cards are best for those who know how to manage credit cards well. Typically, premium rewards cards require excellent credit for successful application approval.

Since interest rates on premium rewards cards are often high, they are best for cardholders who pay balances in full each month. If you often maintain a card balance, the fees and interest you will pay may cost more than the value of any rewards you might earn.

Balance Transfer Cards

Balance transfers offers allow cardholders to finance existing credit card debt, often for little to no interest during an introductory period. After the introductory period, a standard or regular APR applies. These “intro APR periods” can vary in length from six to 20 months or more.

Cards with balance transfer offers may also offer rewards or other benefits. If you are trying to manage existing credit card debt, a balance transfer card may be a financially advantageous option even well after you’ve completed the balance transfer.

In order to qualify for balance transfer offers and cards with 0% promotional interest or a low ongoing rate, you’ll likely need good credit. These types of cards are most likely more available for those with existing credit card debt but whose credit remains undamaged.

You will typically have to pay a 3% to 5% fee on balance transfers, so do the math to make sure a transfer will actually save you money.

0% Introductory Purchase APR Cards

Cards with introductory 0% APR allow cardholders an option to finance sizable purchases as long as you have a plan in place to pay it off before the end of the zero-interest period. After a no-interest period ends, a regular APR will apply. The best intro APR cards offer no-interest periods of a year or more to pay down purchases.

It is important to keep in mind that when using a 0% intro APR card, you must monitor your credit utilization ratio. Ideally, your credit utilization should never exceed 30% of overall available credit across all revolving accounts.

Student Cards

College students, who traditionally have limited credit histories and income, may use student cards to help establish and build credit. The rewards and credit lines on student cards tend to be modest when compared to non-student cards. They will, however, often offer lower rates and fees than subprime cards, not require a deposit and provide additional benefits when used in place of paying with cash or debit.

Credit cards can help students in college manage cash flow and learn healthy finance management. Students who use cards responsibly can graduate with credit history and a good credit score—important factors when applying for an auto or home loan.

Secured Credit Cards

Secured credit cards can open doors for people with no credit history or with poor credit and can help establish or reestablish credit. The best secured cards also offer (somewhat limited) rewards and benefits. A secured card will require a security deposit the card issuer uses to secure or collateralize the account with. If approved for a secured card, you will need to deposit an amount equal to the desired credit line.

If a cardholder maintains a credit utilization ratio of 30% or less of available credit and continues to pay bills on time, a secured card will help build credit and establish good credit history. A cardholder will typically receive a security deposit back if the account closes in good standing or is upgraded to an unsecured card with the same issuer.

Retail Credit Cards

Some retailers offer co-branded store credit cards. These might be open-loop cards, meaning cardholders can use them anywhere, or closed-loop cards, meaning they will only work for purchases made with the retailer.

With the best store cards, you can find access to special rewards, discounts and promotions. With the worst store cards, interest rates can be astronomical and fees hide like briars in tall grass. As with any financial product, ensure you understand all the fine print before applying.

Charge Cards

Charge cards differ from regular credit cards by requiring cardholders to pay off an entire statement balance in its entirety each month. While being required to pay off your entire balance every month may not sound appealing, it’s something that should ideally be done with any credit card and is a useful tool for managing money. You receive the convenience of a card without the risk of seeing debt pile up.

Business Credit Cards

A designated business credit card is a way to maintain the separation between business and personal finances. Like personal cards, the best business credit cards can offer excellent rewards and extra benefits.

Small business cards function much like consumer credit cards. Small business owners will usually need to provide personal guarantees to qualify for a business credit card; a business owner’s personal credit score and history may also determine which small business card is best suited for them.

Larger companies, government entities and nonprofits may qualify for certain corporate cards. Corporate cards provide a line of credit to an organization and not the individual business owner. Corporate cards depend on and affect business credit and therefore may not be available to small enterprises, sole proprietors or independent contractors.

What Type of Credit Card Should I Get?

Choose a credit card based on your credit score, your spending habits and what your financial priorities are. Do you want rewards? Extra benefits? An intro APR period? Do you need a balance transfer?

Regardless of which type of card you have in mind, make sure you meet any specific card’s credit requirements and that its features work well with your lifestyle and needs. There are hundreds of credit card options on the market and with help from resources including those here at Forbes Advisor, you can choose the right one for your financial situation.

How Many Types of Credit Cards Should I Have?

It may be beneficial to utilize multiple types of credit cards as long as you manage them responsibly. Ensure you’re prepared for the responsibility of each credit account and the responsibility associated with managing multiple accounts. There’s no simple answer for the ideal number of cards you should carry, since financial wants and needs vary greatly from person to person.

Find The Best Credit Cards For 2022

No single credit card is the best option for every family, every purchase or every budget. We’ve picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.

Bottom Line

Many types and classifications of credit cards exist. Some cards earn rewards in the form of miles, points or cashback and offer other benefits while other cards can help you finance debt from another credit card with a lower APR. Other cards help consumers build credit and yet others are for financing large purchases. Small businesses and corporations utilize business credit cards to earn rewards and finance expenses. Some cards may accomplish multiple goals.

Choose a card with the benefits that best suit your needs based on who you are and why you need a credit card. It’s also perfectly acceptable not to have or use a credit card.

If you do want a card, be sure to educate yourself on different card offerings and understand the terms completely before you apply so you’re prepared to use the card responsibly if you qualify.



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