Types of Credit Cards

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In this article, you’ll learn about different types of Credit Cards:

If you don’t have a credit card, you can find applications at your local bank. Or you can apply online for a card from a bank such as one of these:

  • Bank of America (bankofamerica.com)
  • Wells Fargo (wellsfargo.com)
  • Citibank (citicards.com)
  • Capital One (capitalone.com)
  • Chase (chase.com)

If you’re looking for a credit card, a site like NerdWallet (nerdwallet.com) or CreditCards.com (creditcards.com) can help you search for and find the card that best fits your needs. Criteria for “best credit card” varies depending on your circumstances, and these sites provide good information about fees, interest rates, and the like.

Normally, if you have no credit history but are at least 18 years old with a job and steady income, you’ll be able to get a card with a limited credit amount, usually $\$ 500{\rm{ to \$ 1000}}$ .

Your chances of getting a credit card increase if you apply for a credit card through a bank with which you have an account. If you don’t have a job, but you have a parent who is willing to be a cosigner or guarantor, you can still get a credit card.

Important

If you’re diligent with your payments, you’ll probably be able to have your credit limit upped after 6 to 12 months. The amount of the increase depends on your income or your ability to repay the line of credit.

Types of Credit Cards

You’re likely to see many different kinds of credit cards. Let’s look at some of the distinctions so you know what’s what.

Charge Cards

These aren’t really credit cards because you’re required to pay off your balance at the end of each billing period. Charge cards are good because you have no interest charges, but they may come with an annual fee, and if you charge more than you can pay all at once when the bill comes, you’ll be assessed a late fee.

Fixed-Rate Cards

These credit cards have a fixed interest rate, which is more comfortable for some people than a variable rate.

You should be aware, however, that all fixed-rate cards reserve the right to raise their rates from time to time, often with as little as a 15-day written notice. Rates on a fixed card won’t vary as much as those on a variable-rate card, but they do fluctuate from time to time.

Variable-Rate Cards

The interest rate on these cards changes periodically based on the rate charged by the lending institution holding the card. The card is tied to an index—normally the Prime Rate. When the Prime Rate is raised, the interest rate on the card rises as well.

Important

If you have or get a variable-rate card, keep a close eye on your statements and any information you get from the credit card company so you’re aware of when the rate changes.

Elite Cards

These status cards, often called Gold, Titanium, or Black cards, offer some advantages such as buyer protection plans or cash back after you spend a certain (high) amount.

They also can offer perks like emergency roadside service, airport club access, hard-to-get reservations in popular restaurants, and insurance on newly purchased merchandise. These cards often have high credit limits, but they usually carry high annual fees.

Elite cards generally are available only to people with established credit reports and high credit scores.

Reward Cards

An increasing number of credit card companies are offering rewards cards that give you something back. You might get cash back (as with a Discover Card), airline miles, a rebate on gas, rental car or hotel discounts, discounted shopping at particular stores, and more. Credit card companies do this to be competitive.

The more you charge to the credit card, the bigger your reward. However, there’s usually a fee involved with getting one of these cards, so think carefully about whether it’s a worthwhile venture.

Important

Some people use rewards cards to pay for almost every single thing they buy—from college tuitions to groceries. If you decide to go this route, be sure you’re able to pay off your balance so you don’t end up paying interest fees and cancel out the benefits of your rewards.

Prepaid Cards

A prepaid credit card is just what its name implies—you pay up front and then use the card until you’ve spent the money. At that point, you need to put more money into your prepaid account or the card won’t work.

The advantage of prepaid cards is that you never incur interest fees because you’ve already paid for your card purchases. Disadvantages, however, are that you often must pay a fee to set up an account and each time you “load” your card. And of course, you need to have money available to get a prepaid card.

Still, prepaid credit cards are useful for people who can’t get a traditional card or are working hard to avoid high credit card interest fees. A site such as CreditCards.com can help you learn more about these cards and how to apply for them.

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