If you are in the market for a new credit card, it’s important to understand the benefits that a credit card could give you.
Each credit card comes with its own set of features.
Top Four Benefits of a New Credit Card
One of the primary reasons why people apply for a credit card is the host of advantages that a credit card could have such as:
- Help save money on interest. Finance big purchases with a long 0% intro APR.
- Help you cover the cost of your next trip when you apply for a Get a travel credit card and receive a sign-up bonus.
- Earn cashback on everything you buy.
- Help pay debt faster. Get 0% intro interest on a balance transfer.
10 Different Types of Credit Cards
In a world of a variety of credit cards, it is no surprise that it’s easy to become overwhelmed by the sheer number of choices constantly being marketed to consumers. You don’t have to learn everything about every single credit card on the market, you just need to figure out which credit card works for you and your needs.
Rewards Credit Cards: Rewards credit cards typically give you points or cash back based on a percentage of your spending and some even offer bonus points in popular categories like groceries, gas, and dining out.
By using a rewards credit card to cover your basic purchases like groceries and household supplies, you can earn cash back and travel rewards for purchases you needed to make anyway.
Cash Back Credit Cards: Cash back credit cards make it easy for you to earn cash back or statement credits on your spending, although rewards vary from card to card.
If you tend to spend more in particular categories, like groceries or dining, you might choose a bonus category card rather than a flat rate card, which is ideal for those with varied spending habits who are looking for an everyday card.
Travel Credit Cards: Travel credit cards offer you the opportunity to earn rewards that are geared specifically toward travel.
If you often travel for business or pleasure, you can also keep your eye out for luxury travel credit cards that offer perks. You don’t even have to leave town to start earning points and miles that could make your next trip even more affordable- many travel rewards cards let you earn these perks by making everyday non-travel-related purchases.
Balance Transfer Credit Cards: If you have some high-interest credit card debt on your hands, you may be considering using a balance transfer credit card to help manage and pay down your debt. Some transfer cards let you secure an introductory 0% APR for a period that typically lasts between 15 and 21 months.
0% Intro APR Credit Cards and Low-Interest Credit Cards:There are an array of credit cards that offer 0 percent intro APR on purchases for a limited time, usually up to 18 months. If you make a large purchase and need time to pay it back, this credit card option might be the right option for you. Similarly, you could also find low-interest credit cards that offer lower than average rates overall, not just in the introductory phase.
Business Credit Cards: These types of credit cards allow cardholders to keep their personal and business expenses separate while they earn rewards on all their business spending. Business credit cards can also be cash back credit cards, general rewards credit cards, travel credit cards, or even secured credit cards.
In general, you want to make sure your business credit card helps you benefit from your everyday spending and makes running your business even easier. Look out for credit cards that offer a generous rewards program and that have expense tracking abilities and features that could help boost your bottom line.
Student Credit Cards: Student credit cards are specifically geared to young people with a limited credit history, meaning that it’s easier to get approved. Most student credit cards don’t charge an annual fee and many offer bonus perks for good grades as well as rewards for every dollar spent. If used responsibly, these credit cards could help young people build their credit and begin implementing good financial habits.
Secured Credit Cards: With secured credit cards, you will be required to put down a cash deposit in order to secure a small line of credit- usually for a similar amount.
While putting down collateral may not seem ideal, secured credit cards are the easiest type of credit card to get approved for, so they are helpful when you need to build credit from scratch or repair your credit.
Store Credit Cards: These types of cards are offered through retail stores to let consumers charge their purchases and pay them off over time.
Generally, store-branded credit cards have higher interest rates than general-purpose cards, and they are often more likely to charge deferred interest. If you do pay off your store credit card on time, you may be able to take advantage of some great perks and rewards programs.
Co-Branded Credit Cards: These cards are offered through traditional card issuers like Chase, Citi, or American Express. These include airline credit cards that let you earn miles with a specific frequent flier program or hotel credit cards that let you earn points with a hotel loyalty program.
Some of these credit cards also partner with retail stores, although you can typically use them for non-store purchases as well. Co-branded credit cards are typically limited to one brand, but their rewards are solid and often the value of these rewards end up being worth more than cash back.
How to Build Credit:
Building credit can be tricky. If you don’t have a credit history, it can be challenging to get a loan, credit card, or even apartment. This begs the question, how are you supposed to build credit if no one will give you credit in the first place?
Building Credit with a Credit Card:
One possibility is to start with a secured credit card or co-signed card, or ask to be an authorized user on another person’s card.
A secured credit card is backed by a cash deposit you make upfront; the deposit amount is normally the same as your credit limit. You’ll use the card to buy things, make a payment before or on the due date, incur interest if you don’t pay the balance in full, and you’ll receive your deposit back when you close the account. These types of cards aren’t meant to be used forever. The purpose is to build your credit enough to qualify for an unsecured credit card.
It’s also possible to get a loan or an unsecured credit card with a co-signer. It is important to note that the co-signer will be on the hook for the full amount owed if you don’t pay.
Good Credit Habits to Help You Build Credit from Scratch:
- Make Payments on Time: Your payment history, specifically, your track record of making on-time payments, can be a significant factor in determining your credit rating. Setting up automatic payments can help to ensure that you don’t miss a due date.
- Create a Budget:Seeing where your money goes each month could help you set aside loan or credit card payments before you start spending each month.
- Exceed Minimum Payments: Minimum credit card payments come with the hefty cost of interest charges. If your interest adds up, it will end up costing you more money in the long run, making it harder for you to pay off your debt.
- Stay Under Your Credit Limit: Experts recommend using no more than 30% of the total credit you have available.
- Be Careful with Credit Applications: Applying for a bunch of credit at once could make your financial situation look much worse than it actually is because multiple hard inquiries in a small amount of time could hurt your score.
- Monitor Your Credit: Once you start to build credit, it might be a good idea to keep track of where you stand and alter your methods based on evidence.
Credit cards offer convenience, consumer protections, and a quick way to build good credit, assuming you use them responsibly. Understanding how credit cards work will help you choose the right cards for you. Begin implementing our favorite tips and start managing your credit.