About Different Types of Credit Cards
Credit cards come in hundreds of varieties, from reward cards that pay rebates to secured cards that make you pay for the privilege of carrying them. Here is an overview.
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Identification
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Because the credit card industry is so competitive, credit card companies are offering reward cards to try to lure customers. Many rewards are available, such as cash back, airline miles and points that can be used to buy merchandise or redeemed for cash. These cards are usually only available to customers with relatively good credit and often have slightly higher interest rates than nonreward cards. An annual fee may apply.
Types
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Business cards are specially marketed to business owners and include features like group billing statements, extra rewards for travel and office supplies, and other perks that benefit businesses. There is typically a fee associated with a business card, and the grace period on purchases is often shorter than average. These cards may or may not have a credit limit--the absence of a credit limit may be attractive to business owners who are not entirely sure of their credit needs.
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Function
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As the name implies, secured cards are secured with a deposit equal to the credit limit on the card. These cards are excellent for people who are trying to rebuild their credit or who have no credit history. However, there are often high fees associated with this type of card.
Features
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Balance transfer credit cards are specially marketed for consumers who already have balances on other credit cards and are looking for a lower interest rate. These cards usually come with an extremely low teaser interest rate, often as low as 0 percent, for an introductory period ranging from 6 to 18 months. After that, the rate may go up, but as long as the customer maintains a perfect payment record, the rate usually stays relatively low, around 10 percent. There is usually a balance transfer fee associated with these cards, ranging from 1 to 3 percent of the amount transferred. This fee may or may not be capped, with a typical cap from $75 to $100.
Benefits
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Much like secured cards, prepaid cards require a deposit equal to the limit on the card. They function like a debit card, so they must be reloaded as the deposit is spent. While they are marketed to those with poor credit, they also make an excellent choice for college students or other young people who don't have a credit history or need to have parent-imposed spending limits in place.
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