There are loads of credit cards from various credit card issuers available to the public these days. Before you know how credit cards work, you should understand the types of cards available and your requirements.
According to SoFi, “Thankfully, there are credit cards designed for people with nearly every credit profile, from those who have excellent credit to those with no credit history or serious credit problems. As with any loan, those with the highest credit score will receive the most competitive terms and benefits.” So let’s see what are the different types of credit cards:
Standard Credit Cards
Also known as the plain vanilla credit cards, these cards offer no rewards but are very easy to understand. You can choose this type of credit card if you don’t want any complications or any of the rewards offered.
A standard credit card lets you have a balance up to a specific credit limit. The credit gets used up when you buy items or services, and you can refill the credit by paying your bill. However, a finance charge is levied on outstanding balances at the end of the month. So you need to keep in mind the minimum payment that needs to be paid and the due date so you can avoid penalties.
Balance Transfer Cards
Many credit cards can transfer balances; one such card is the balance transfer credit card. It offers a low introductory rate on balance transfers for a specific period. If you wish to save money on high-interest rate balances on your existing card, choosing a balance transfer credit card is the way to go.
The balance transfer interest rates can differ—some can be as low as 0% but usually have qualifiers like a fee for each transfer. If the promotional period is long and the promotional rate is lower, the card is an attractive option. But there’s a catch; you’ll need good credit if you want to apply.
Rewards Credit Cards
As the name suggests, reward credit cards offer rewards when you make purchases with your credit card.
You would come across three basic types of rewards cards. There’s the cashback, travel and points. While some prefer the flexibility of cashback rewards, others would rather choose points that can be redeemed for merchandise, gift vouchers or cash. Finally, the travel rewards cards maintain their favorite spot as the best card for frequent travelers due to the ability to earn travel perks, hotel stays, and even free flights.
Student Credit Cards
This one is also pretty clear. Student credit cards are specifically designed for college students. Banks and financial institutions understand that young adults usually have little or no credit history. So a novice credit card applicant would likely have an easier time getting approved for a student credit card than other types of credit cards.
Like most other cards, these student credit cards might come with additional perks like rewards or a lower interest rate on balance transfers. Generally, students must be enrolled at an accredited four-year university to apply and be approved for student credit cards.
These cards do not have a preset spending limit. The balances need to be paid in full by the end of every month for charge cards. Usually, charge cards do not have a minimum payment as the balance should be paid in full. If there are any late payments, a fee is added. There are also charge restrictions or card cancellation if there are late payments but that depends on your card agreement. Additionally, you need good credit history to qualify for charge cards.