If you’ve never really looked into credit cards before, you might assume that all of them are similar in most ways. However, that’s not true. There are four different types of credit cards you can apply for, and each has its own set of drawbacks and benefits.
When you hear people talk about earning points with their credit cards or scoring cash back, they’re most likely referring to a rewards credit card. These hand out several different kinds of benefits in the form of travel deals, airline miles, discounted gift cards, or even cash. All you have to do to earn the points is use the card to pay for goods and services.
Secured Credit Cards
Generally, these cards are a smart choice for people who are working on repairing their poor credit score. The credit company will require you to put down a deposit before using the card as a form of collateral. Then, as you make your payments on time and use the card wisely, you’ll be able to transition to a secured card in the future.
If you’re planning on only making the minimum payment on your statements, or if you know you’ll need to accrue some credit card debt in the future, these cards offer low APR’s and can help you save. However, it’s important to keep in mind that all credit cards have at least some kind of interest rates for outstanding balances, so a low-interest card doesn’t hand you a free pass to skip payments.
Balance Transfer Cards
When people accrue a hefty amount of credit card debt, they’ll often apply for a balance transfer card that allows them to shift their debt. This will give them a little more time to make their payments, usually without the burden of interest. There is a fee that comes with most of these cards, but it can still help people climb out of debt quicker.