In this post-modern era of technology and cashless economy, different credit cards are offered by different issuer banks. Among the array of all sorts, choosing the rightmost card for oneself might be overwhelming. As such, before plucking the fittest card for the wallet, consumers should check out the most popular types of cards.
8 Types of Credit Cards – Explanation with Examples
People from the different working-class call for the different requirements from a card. To meet these demands, issuers have come up with cards having distinct and specialized features since the genesis of the credit card. The most common and popular cards are taken into account herein from the large arena.
1. Standard Credit Card
Standards Credit Cards are uncomplicated cards that usually offer no privileges or rewards. These have standard features like certain credit limits, minimum payment requirements, and regular credit card usage costs. As no specials frills are offered, these are often referred to as Plain Vanilla Cards.
Standard Credit Cards are convenient to get and easy to understand. Since no perks or rewards come with them, APR is comparatively low.
These cards don’t offer any reward points. So usage brings no extra motivation to the consumers.
2. Balance Transfer Credit Card
Balance Transfer Credit Card is a version of standard cards. This card allows a person to transfer his outstanding balance from an existing card. Those looking for dispersing payment of entire credit card debt over a longer period, usually from six months to a year, may prefer to sign in to this card, transferring the debt from a card charging him at high APR.
Balance Transfer Cards offer 0% APR for an introductory period, known as 0% APR Intro Credit Cards. A consumer can avoid paying high interest when he transfers his dues from an existing card with a higher APR. This provides consumers a breathing period for repayment.
Balance Transfer Cards don’t facilitate users with any reward points or extra benefits. These may require a minimum number of transactions of two or three each month. Consumers usually need a good credit score to get one.
3. Rewards Credit Card
When all are worried about getting charged with a high rate of interest, credit card companies have come up with the idea of Reward Credit Cards. Each time a consumer makes a purchase, he gets a reward for that usage. These rewards have different forms, e.g., cash back on use, reward points on specific purchases, travel rewards, free or complimentary stay at hotels, discounts at stores, etc.
Cardholders always get something extra at the cost they incur on these cards. People are always fond of rewards and bonuses. Apparently, they are getting some extra out of what they are spending. A person with a fair credit score will easily be eligible for this card.
Reward Cards charges consumers with extremely high APR ranging from 12% to 14%. Users may get into trouble for their rapacity for rewards if expenses with cards are outweighed.
4. Secured Credit Card
A secured Credit Card requires an initial deposit against therein to mutualize the risk on the card. Usually, people with bad or no credit history are the target group of this card. Usually, this type of card has an equal amount of credit limit just as the security deposit but can offer more than that amount. These are also known for Credit Builder Cards.
Anyone depositing a security amount will get this one, irrespective of his credit score. However, people with bad credit scores or no prior credit history can build up a good reputation by paying due time with this type of card. Helpful to those looking for a serious loan like a mortgage loan or auto loan in the future.
Besides providing a security deposit, the cardholder still has to pay the minimum dues and usual interest charge. Usually offers very low or no amount of rewards.
5. Prepaid Card
Prepaid cards are not credit cards. Cardholders require to load money on the card before it becomes ready for use. The amount spent by the cardholder is deducted from the loaded amount on the card. Unlike debit cards, these are not linked with any checking account. You can learn about the differences between a credit card and debit card from our previous study.
These cards work on the principle of ‘go per pay.’ As the spending wouldn’t go beyond the loaded amount, no debt will be created. Also, these cards don’t have any minimum payment requirements or finance charges.
Prepaid Cards do not affect a consumer’s credit report or score. These don’t help with getting bigger credit recommendations in the future.
6. Purchase Credit Card
Purchase Credit Cards are designated for shoppers who go shopping very frequently. Some of the cards are designed only to be used at particular stores or retail centers. Then again, these are specific types of purchase cards, namely Retail Credit Card.
Purchase card comes with many perks offering like reward points, cashback, discounts on occasions, etc. It helps the user building a good credit history if he utilizes it wisely.
The user requires a good credit score to put this card into the pocket. Also, the credit limit on this card is very low in usual cases, so it doesn’t help in a large number of transactions.
7. Charge Credit Card
Charge Credit Cards can be used without any preset limits, but the cardholder has to pay the due amount at the end of the month in total. If otherwise, he has to bear a penalty on the due amount for late payment.
Finance charges can be avoided if payment is made in due course. This card is helpful in the case of high-end spending as there is no preset limit.
Only consumers having a perfect credit score can qualify for these cards. Persons having little control over their expenses might get under huge debt.
8. Student Credit Card
With a primary focus on the students, this type of card is designed to be the first card in one’s life. This comes with a motto to help the students with little credit to make things easy and comfy. Though it has charges and APR, they are considerate of students’ income sources.
Student Credit Cards can be the stepping stone towards one’s future credit potentiality. Students resulting good in the academy might get some bonus offers. These don’t require any credit score, and even APR is very low.
The credit limit is very negligible on this sort of card. Not a lot of perks and benefits are tagged along with this sort of card.
Different types of credit cards have been designed for consumers by taking different needs and motives into account. Before locking upon the particular one, a person should critically assess if his requirements are aligned with the features offered along with the card. Moreover, choosing the right card is essential as it affects one’s credit track.