There are three main types of credit cards: standard, premium, and rewards. Each type serves a different purpose and gives you different benefits, so understanding them will help you to choose the right one to fit your lifestyle and financial goals. We’ll walk you through what makes each credit card unique so that you can find the right one for you.
Debit Card People
Debit cards take money out of your checking account when you make a purchase, which is great for those who are trying to live within their means. (But if you’re using credit cards to finance lifestyle purchases like traveling or shopping, that’s another story.) While it might be a safe option for many people, debit card users should beware of fees that can get expensive quickly.
For example: overdraft fees (which can easily run $30 per transaction), ATM withdrawal fees ($2.50 to $5 per withdrawal), and inactivity charges ($1 per month after 12 consecutive months without activity). If you’re looking to avoid these types of fees, consider getting an American Express Bluebird prepaid debit card instead.
The Bluebird doesn’t charge any monthly service fees and allows free domestic ATM withdrawals—but only has limited retailer acceptance so it’s not ideal for everyday use. If you’re looking to build credit history while avoiding high-fee accounts, however, go with a secured credit card instead. It’ll help build your credit score while keeping costs low (since there’s no spending limit) by requiring a security deposit up front that serves as collateral in case you don’t pay off your balance each month.
Secured cards typically approach with higher interest rates than familiar credit cards. But they still tend to have lower rates than most other loan products, making them a good deal overall. Another downside? Secured cards typically advance with higher interest rates than common credit cards.
But they still tend to have lower rates than most other loan products, making them a good deal overall. After picking a card type, choose wisely based on perks and rewards: All three major credit bureaus (Equifax, Experian, and TransUnion) offer two different versions of their FICO scores—one version uses payment information from just one bureau; another includes data from all three bureaus in order to paint an even more comprehensive picture of your financial profile. Getting access to both versions is essential, since they’ll give you a better idea of how lenders see you.
Plus, because credit scores change frequently over time depending on various factors like how much debt you’ve taken on and whether or not you’ve paid bills on time, it’sEssential to check your attain at fewest once a a period of 365 days. However, keep in mind that different lenders may look at things differently—and some may even ask for specific credit reports rather than relying solely on your FICO score.
So make sure to check multiple sources before applying for new loans or opening new lines of credit. And if you do apply for something with bad (or nonexistent) credit, know what questions lenders will likely ask about why your credit isn’t better before applying.
Classic Credit Card People
If you carry a gold or platinum credit card, you probably have good credit. While it’s not necessarily true that your best option is to load up on these kinds of cards, they can be useful if you want to keep your overall balance low. So long as you pay your balance in full each month (you aren’t carrying debt) and don’t spend more than you can afford to pay back, having a few high-limit cards won’t hurt your credit score too much. Plus, they let people know that you have means – at least until someone calls Experian looking for verification. One piece of advice: If you do decide to open one of these accounts, make sure that you choose an account with rewards (or one with no annual fee).
Rewards can include things like cash back or airline miles. If there are no rewards, then why bother? Also, watch out for annual fees. Many of these classic cards come with hefty costs associated with their use. Onyx Card People: The most common version of a black credit card is an American Express card. AmEx tends to offer higher rewards programs than other issuers, but those perks usually come at a price—usually in terms of either money or increased interest rates on purchases and new charges over time.
Types Credit Cards
For example, AmEx will often offer double points or cash back options; however, sometimes those deals require you to spend more money within a given time period to qualify for them. Additionally, many Onyx Card holders also have bad credit ratings—so just because you might have trouble qualifying doesn’t mean it’s not worth trying anyway! Your FICO Score may take a hit, but if you’re planning to make large purchases soon (like buying a house), using an Onyx Card could help boost your score fast. Black Card People: Black cards typically fall into two categories: Visa Signature cards and American Express Centurion (Black) Cards. Both types of accounts tend to charge extremely high interest rates—often in excess of 20% APR per year—and both require excellent credit scores to get approved for them.
In addition, both types of black cards typically come with some sort of reward program attached to them; however, unlike with standard white-card rewards programs, these reward programs tend to cost extra money upfront before any benefits kick in down the road.
Cash Back Credit Card People
These people like to save money in their day-to-day lives, but still have a problem with impulse shopping. These cards offer cash back bonuses for purchases so users get a small portion back from what they spend. A $100 purchase can earn you $10 or more – often enough to cover your annual fee.
The potential savings are enticing, but you need to make sure you aren’t paying an annual fee in order to take advantage of those savings. If you love saving money on everyday purchases, then these are your cards! People who carry them: Cash-strapped grad students who have trouble saving, compulsive shoppers that don’t know how to say no, frugal young professionals looking for something extra while making large purchases. People who don’t carry them: High rollers that shop at expensive boutiques regularly, established professionals with no trouble making ends meet each month.
Rewards Cash Back
More Rewards than Cash Back: This is usually accomplished through some type of point system or miles that accrue as you use your card and redeem them later (like gift cards) toward new items or experiences. People who carry them: Frequent travelers, big spender, people with high credit limits. People who don’t carry them: Low budget travelers or bargain hunters. Balance Transfer Cards: With low interest rates and 0% intro APR periods lasting up to 18 months, it’s easy to see why balance transfer cards are so popular among consumers.
Those who want to pay off debt without getting hit with high interest payments will find that a balance transfer card could be just what they’re looking for. However, there are some downsides to these cards too. For example, many come with hefty fees if you’re not able to pay off your debt before your introductory period expires and there may also be restrictions on how much you can transfer over at once. Still, if you play your cards right, a balance transfer card could work wonders for your finances. People who carry them: Those interested in eliminating debt quickly and easily People who don’t carry them: Those seeking rewards programs or other perks associated with other types of credit cards