Getting a credit card in 2022 is easier than ever. You can apply online to your bank or any other credit provider and get approval in mere minutes. There are many different kinds of credit cards available, with something to suit everyone, whether it’s a regular credit card, revolving credit, store credit cards, or any other kind.
Of course, this can set people up to fall into a debt cycle. Credit cards need to be used responsibly, but with providers handing them out willy-nilly, it is up to you to make the responsible decision.
In order to get a credit card that best suits your needs, you need to know what kind of credit cards are available today. The following types of credit cards are the most common.
Rewards Credit Cards
One of the reasons people get credit cards even when they do not need the extra funds is because of the reward programs on offer. Unlike reward programs at most stores, credit card reward programs generally offer valuable bonuses. These may be in the form of discounts on things like electronics or appliances, as well as cash back rewards.
The kind of credit card you should get if you are in it for the rewards should be based on what you will benefit from most. Some people prefer to just get straight cash back, but others enjoy the prospect of spending their rewards on things like travel, fashion, or dining out.
A revolving loan is not technically a type of credit card. Rather, it is a loan you get, usually from your bank, that provides you with an amount of money you need to pay back over a specified period of time. Revolving loans are unsecured and therefore have relatively high interest rates, although they can be lower than those you would receive on a credit card.
The difference between revolving loans and regular loans is twofold. With revolving loans, you only pay back what you have used. Therefore, if you don’t end up using the full amount, you never have to pay that money off. Secondly, your loan does not end when you have paid it up. Rather, you can take more money out again, as long as you then start paying back the minimum amount month after month.
In these ways, revolving loans resemble credit cards. They are likely to cost you less than what you would spend paying a credit card back, but they also lack the benefits of credit cards, such as rewards programs.
Balance Transfer Credit Cards
Balance transfer credit cards exist to help people who are struggling with credit card debt. Many people get credit cards with high interest rates when they are in a pinch, and are then stuck paying back exorbitant interest. Balance transfer credit cards are used to pay off other credit cards, thereby transferring that credit to the new card.
The benefits of doing this are generally that the new credit card comes with lower interest rates and better terms. You may even be exempt from paying interest for a specified amount of time – usually between 15 to 21 months – giving you the chance to get back on track.
You will likely have to pay an upfront balance transfer fee, which will be about 3% to 5% of the total balance.
Secured Credit Cards
Traditionally, credit cards are unsecured. This means that if you fail to pay back what you owe, the credit card provider has no deposit or asset to seize. This is why credit card interest rates are higher than most bank loans. However, there are secured credit cards available.These are credit cards on which you pay a deposit to get the same amount available in credit. In other words, if you pay a $500 deposit, you will have $1,000 to spend on the credit card.
Secured credit cards are often used to improve credit scores or to build credit from scratch. You will pay low interest rates but are less likely to find options with great rewards programs.
Student Credit Cards
Student credit cards are useful for students with little or no credit history. Similarly to secured credit cards, they help build a credit score from scratch without too high an interest rate. However, you do not need to put down a deposit, and there are far better rewards programs available.
These rewards programs are generally geared towards supporting students with useful rewards. Some student credit cards even reward you for getting good grades.
Store Credit Cards
Finally, if you need to buy items from a specific store, or just particularly love visiting a specific store, you can get a store credit card without much trouble. These credit cards usually promise free gifts and benefits at the store. However, they come with high interest rates and you will end up paying far more for your goods than you would with cash.
Store credit cards are best avoided, unless you are certain you will be able to pay them back before the interest begins to outweigh the benefits.
Choosing a credit card should have more to do with what you need than attractive offers. The best credit cards provide funds and rewards with low interest rates and excellent terms.