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Types of Credit Cards

By: David Benton

It’s never been a better time to be in debt! At least, that’s what credit card companies want you to believe. And to better help you believe this, they offer more than just your standard Visa or MasterCard.

The best way to look at the many types of credit cards offered today is to look at which ones consumers might be interested in over the course of their lifetimes. The order might go something like this:

  • Student Credit Card
  • Bad Credit Credit Card
  • Business Credit Card
  • Rewards Credit Card
  • Cash Back Credit Card
The order might be different from one person to the next, but let’s use this one for the sake of argument.

Student Credit Card:

A student credit card is generally a welcome addition in life because it allows young college students to begin building up their credit score and developing a positive credit history. On college campuses across the nation each year credit card companies set up booths and stands, luring students to apply by giving away free t-shirts or beverages. Banks usually qualify most students as well when they open up a checking account.

A student credit card can be a great asset to the poor college student who runs into financial troubles, school troubles, or even car troubles. Unfortunately, all too often students fail to manage them properly; failing to pay attention to their credit line and how much they spend, the interest rate being charged (which is progressively getting higher each year) and the fees.

Bad Credit Credit Card:

Bad credit no longer inhibits individuals from getting a credit card. In fact, there is a rising trend in the lending industry to give individuals who have filed for bankruptcy a new card within as little as a year. Applying for a credit card of this type is a task not to be entered into lightly though. Individuals should understand that they will pay a significantly higher interest rate on purchases each month—as high as 24% or even more. There is no limit to how much credit card companies can charge in interest. They can also raise your interest rate whenever they like.

The positive aspect of this type of credit card though, is that it provides people with the opportunity to begin repairing their credit, provided they make their monthly payments on time. The important thing to remember when accepting this type of credit card is to not make your credit problems any worse than they may already be.

Business Credit Card:

The business credit card is great for small business owners and freelancers. They generally come with low introductory interest rates, airline rewards and other discounts. They are also generally easy to get as long as you have good credit. Business credit cards provide simplicity to one’s finances; allowing one to track business expenses easily, as well as consolidate monthly bills into one easy payment.

Rewards Credit Card:

When it comes to this type of credit card, make sure and read the fine print. Credit card companies like to woo consumers in with these types of cards by offering rewards, such as trips to Hawaii, DVD players, MP3 players, and gift cards—just about any type of item they can think of. They all vary from one company to the next.

The fact of the matter is that the interest rate is usually slightly higher than standard credit cards, and these rewards are not so easy to obtain. For example, let’s say you need 5,000 reward points in order to get a trip to Disneyland. Let’s also say that $100 equals one reward point. This means that you would have to charge $50,000 in order to earn a vacation that you could pay out of pocket to take for around $5,000. This example might be a little extreme, but the idea here is to show you that you will pay five times as much (maybe even more) in order to earn these rewards.

These types of cards generally work for people with a high income that spend a lot and are also able to pay off their card balance in full each month. If this doesn’t describe you, then you may want to pass on this type of card.

Cash Back Credit Card:

This type of card does exactly what its name implies. You essentially charge purchases on the card, and in return you get a small percentage of the money back, usually nothing higher than 2%. This money generally comes in the form of a rebate check at the end of the year, or sometimes a gift certificate to be used as you see fit, and sometimes it is applied to any outstanding balance you may have on the card. They work as simple as that. However, just as you should with any credit card you’re considering applying for, you need to make sure and read the fine print.

As mentioned, some peoples’ experiences with credit cards may fall in this order. For some it may be different. But the point is that there are numerous credit card options available today for consumers, which makes it important that they shop around to see what credit card type suits them best, as well as which company, before committing to anything.

Be smart with your money, and even smarter when accruing debt. If you don’t overextend yourself then credit card problems will never exist. Credit cards, no matter which type, can be good items to have in life. Just make sure not to make the mistakes that make them bad to have.