Types Of Credit Cards Explained
Credit cards have become part and parcel of human life worldwide. These unique pieces of offerings offer an ideal way of borrowing rather than having to contend with shylock services. In a field where hundreds of options are spread across dozens of card issuers, one is always sure to be spoilt for choice. Likewise, choosing the right credit card can always be a challenge, given the vast range of options to choose from.
The type of credit card to settle comes down to how much one can afford as well as credit score and why one wants a credit card. Below are some of the most popular types of credit cards.
Standard Credit Cards
Often referred to as plain-vanilla cards as they don’t offer any rewards or frills, standard credit cards are the most basic type of credit card ideal for people who only want to borrow cash and are not looking for rewards.
These credit cards come with a revolving balance of up to a certain credit limit. Once the allocated credit is exhausted, a new credit limit is issued upon making payment.
0% Balance Transfer Credit Card
If you already have a credit card, you can always reduce the amount of interest you pay by moving the existing card debt to a Balance Transfer Credit Card. While the transfer comes at a small fee, it offers a way of enjoying a 0% or much lower interest rate over a given period.
Balance transfer credit cards offer a way of minimizing the cost of borrowing from existing debt. However, it is essential to note that once the 0% deal finishes, the credit card issuer will start charging interest on the card but at a standard rate, which can be much lower than in the previous card interest rate.
The idea with the 0% balance transfer credit card is to have ample time to pay off the balance before the deal expires. In addition, you can always move from one 0% balance credit card to another.
Interest-Free Credit Card
An interest-free credit card is a special type of credit card that allows people to enjoy 0% interest on purchases. What this means is that you will not incur any interest on certain purchases for a specific period, usually 27 months.
These types of credit cards are best suited for people who wish to spread the cost of large purchases. Likewise, they come in handy whenever one wishes to make lots of smaller purchases over a prolonged period.
However, these credit cards should be approached with lots of caution, given the increased temptation of incurring more debts with purchases. Similarly, it is important to put some money on the side to repay the debt at the end of the 0% interest period.
Bad Credit Score Credit cards
Contrary to perception, it is very much possible to get a credit card with a low credit score. Bad credit card scores are ideal for people trying to build their credit rating or build one, if with no history. The downside to these credit cards is that they come with a high annual percentage rate of between 25% and 60%.
In addition, these types of credit cards come with a very low initial credit limit of between $100 and $200. However, the limit can always be increased.
Cash Back Credit Card
Cash back credit cards are some of the best credit cards for high spenders. These credit cards allow people to earn as they spend. The earnings are usually deposited in one’s account, either monthly or yearly.
In most cases, one can earn between 0.25% to 2% of the total amount they spend using a credit card. Some of these credit cards come with a high introductory rate of up to 5%. However, the amount of money that one earns may be capped.
Prepaid cards are slightly different from other credit cards in that one is only allowed to spend saved or preloaded money. The cards are common with people fond of traveling overseas and looking to avoid the hefty foreign loading fees.
Instead of signing up for these cards, some people often resort to credit cards that don’t charge any extra fees on purchases made overseas.
Money Transfer Credit Cards
Money Transfer credit cards are a special type of credit card that allows you to transfer money from a credit card to a bank account. Such credit cards can be a savior if one wishes to clear bank overdrafts only to remain with credit card debt.
These types of credit cards stand out partly because they come with a 0% rate period. In this case, one gets to enjoy a 0% interest rate over a specific period. However, it is important to note that the transfer often occurs at a small fee.