Not all credit cards are designed for you. The right credit card for you depends on several factors. From what your needs are to how much you spend, what exactly you spend on, your credit history, your travel patterns (domestic and foreign) – everything needs to be considered! With more than a dozen credit card issuers offering hundreds of credit cards, choosing which one is the best for you could be tough. Given below are different types of credit cards that are worth knowing about.
Standard credit cards
These are the most common types of no-frills credit cards. A majority of credit card issuers offer standard credit cards. However, the applicable APR (annual percentage rate) on such cards could vary. The following two types of standard credit cards would make it clear:
· Balance transfer credit cards
Such credit cards allow you (as a customer) to transfer a high interest balance onto a credit card that has a low interest rate. Usually, balance transfer credit cards have a 0% introductory APR, which could last from a couple of months up to a year. However, the terms and conditions applicable to such credit cards could vary between offers. This makes it important to read the terms and conditions for your chosen card thoroughly before applying for it.
· Low interest credit cards
These credit cards either have a low fixed-rate APR or a low introductory APR that climbs to a higher rate after a specific period. If you usually make large purchases, low interest credit cards could be extremely useful. That’s because you will get a couple of months to a year to pay off your card balance at nil or very low interest.
Reward credit cards
Credit cards with rewards programs let users earn incentives when they make purchases using their credit cards. When you spend beyond the specific limits set by the card issuer, you will accumulate points. These points can be redeemed for a variety of rewards after a certain period. Your credit score needs to be better than the average to get approval for reward credit cards. Since such credit cards usually charge a steep annual fee and have high interest rates, you should check to find if the benefits on offer outweigh the costs.
A few key types of reward credit cards are:
1. Cash back credit cards
Purchases made using such credit cards let you earn cash rewards. Usually, the extent of cash rewards would go up if you use your card frequently. Some cash back credit cards reward increased usage with a higher cash back percentage. But there are others that could offer higher cash backs only when you shop at select merchants or make particular types of purchases. Since cash back credit cards usually come with a steep annual fee, it’s best to opt for them only if you’re sure of paying off your card balances on time each month. If you use such credit cards responsibly, you would be able to earn a considerable sum by way of cash backs over time.
2. Travel/hotel points credit cards
Such credit cards are designed for travel and hotel stays. Purchases you make for travel or accommodation earn you reward points, which could be redeemed for discounted tickets, free nights and upgrades, discounted food and beverages at the hotel and so on. Since running these reward programs is an expensive affair for credit card issuers, most of these credit cards have a high annual fee. In case you’re not a frequent traveler, such credit cards may be unsuitable as their annual fee is likely to overshadow the benefit of the rewards you earn.
3. Frequent flier/airline miles credit cards
These kinds of Credit Cards let you earn airline mile credits whenever you make purchases. The more you purchase, the more would be your airline mile credits. Some of these cards could be co-branded with a specific airline, where you’ll accumulate points only when you fly with that specific airline. But such credit cards may offer added perks like priority boarding, no baggage fees, etc. There are also some other cards that are generic. You can redeem points accumulated with these credit cards for tickets with different airlines.
Credit cards for bad credit
Secured credit cards fall under this category. They are ideal for those with a poor credit history or less-than-fair credit status. Such credit cards need you to give a security deposit. Typically, the card’s credit limit would be equal to the amount of the security deposit you make. Furthermore, like other credit cards, you’ll still have to make monthly payments on the balance of your secured credit card.