Credit Card Types
Credit card types are selected depending on the user’s specific preference in selecting a credit card, see the guide below to pick the credit card type that suits your needs. So you want to sign up for a credit card, but there are so many credit card types that you don’t know where to begin. Let’s narrow it down for you; below you will find a brief description on each type of credit card that will help you in making your selection.
Standard or Plain Vanilla Credit Card
Because they have no frills or perks, standard credit cards are referred to as "plain-vanilla" credit cards. They're also rather simple to comprehend. If you want a simple credit card and aren't interested in collecting points, this is the card for you.
You can carry a revolving balance on a normal credit card up to a specific credit limit. When you make a purchase, credit is depleted, and once you've completed the payment, new credit is made available. At the end of each month, a finance charge is added to outstanding accounts.
Rewards Credit Card
Rewards Credit Cards give the user rewards for every dollar or respective currency unit they spend. Rewards typically come in the forms of cashback, points to spend in a dedicated webshop or Airmiles. Rewards can usually be redeemed for checks, a statement credit, gift cards, or travel discounts. Most credit card companies lure users with signup rewards or 0% interest rates for the first financial period or incentives when the users reach a certain threshold of spending.
How to compare rewards credit cards:
Annual Fees
The higher your rewards, the higher your annual fees are most likely to be. Before you sign up for a rewards credit card, compare your rewards based on your spending per year with the interest rate to establish whether it is worth it or not.
Interest Rates
Similar to the approach used by the balance transfer credit card issuers, several companies offer 0% interest for the first year and then charge inflated interest prices for the following year. Check if this works out better for you compared to the rewards you could earn.
Tiered vs Untiered
Some cards contain tiers of prizes, while others have a fixed reward structure. For different types of purchases, tiered cards give different levels of incentives. For example, a tiered card can give you three points for every dollar you spend on gas but just one point for every dollar you spend on groceries. Fixed cards, on the other hand, pay the same amount of money no matter where they're used. A set rewards card, for example, might offer 1% or 1.5 percent cash back on all purchases.
Balance Transfer Credit Card
Typically balance transfer credit cards are those which have little to no fees for a specified period of time. The provision of these types of cards allows users to pay their debt off faster to mitigate interest rates that are accumulating on debt held elsewhere. Basically, the debt is transferred from one credit card company to another credit card company where interest is mostly or completely eliminated. However, balance transfers hold a set of conditions under which they can be utilized.
- Debt cannot be transferred from one card to another card that is issued by the same company.
2. The debt should be paid off before the 0% interest-free period which will be specified upon the issuing of the card, as these rates skyrocket by unjustifiable rates. On average, the end of 0% period rates jump up by 18-25% interest. This could end up costing even more money than what you initially attempted to save by acquiring the card in the first place.
3. You should always pay minimum monthly installments in order to retain your 0% benefit. Not doing so can result in penalization and often companies forfeit the 0% deal and there is no going back once you don’t stick to your end of the bargain.
4. Withdrawing cash is more expensive than usual credit cards, hence it is advised to defer from unnecessary expenditure on your balance transfer card.
5. In order to utilize the 0% condition, the balance transfer should usually be made within the first 1-3 months, depending on your issuer. Always check the details and adhere to them or it will cost your more money than you intended on saving.
Business Credit Card
Business Cards usually serve the purpose of keeping certain expenses separate from the mass expenditure of either a business or individual. Like the selection of any credit card, you should compare you annual costs of having the credit card with your APR to find the best card to suit your business’ needs.
In addition, several business credit cards offer lounge access in selected airports. If you are a frequent flyer for your business activities, this might be a benefit you’d want to consider to make your business trips more comfortable.
Airline credit cards are designed for frequent flyers, the principle of these cards reward you for traveling as it enables you to save your miles and spend it either on other offers tied to the credit card or to receive a discount when booking your next flight. People who sign up for airline credit cards are those who live and work in a country that is different from their home or international students who live abroad temporarily.
Most Travel Credit Card companies offer benefits like access to lounges, cheaper upgrades on your flights, free checked baggage on flights where they usually cost extra ontop of the price of your flight. However, airline credit cards are only worth signing up for if you are loyal to a particular airline. Things to consider when signing up for an airline credit card:
- How frequently do you fly? Are your annual charges worth your while in comparison to the savings you will make as a frequent flyer?
- Does your preferred airline usually charge extra for checked-in baggage and does their credit card offer it for free?
Is the card airline sponsored or bank-sponsored? The reasoning for this is that airline-sponsored cards are to be used for one particular airline and bank-sponsored cards allow you the consumer to chose the airline you wish to fly with.
Gas Credit Card
With some of the top gas credit cards giving 3% to 5% cash back on petrol purchases, you could easily earn $100 or more in rewards just by using the correct card to fuel up. With so many credit cards to choose from in 2021, it can be difficult to figure out which gas credit card is best for you:
1. Stick to gas credit cards that are non-branded: Using a credit card associated with a single gas station chain can limit your earning potential. You're better off getting a generic gas card so you can earn points whenever and anywhere you want.
2. Choose a gas card that also gives you points in other categories: The best way to get the most value out of your gas credit card is to choose a card that earns rewards in multiple categories. For example, if you pick a card that earns 2X points on gas and groceries, your card becomes exponentially more useful, as you'll earn rewards not only on all your gas purchases, but in another major household spending category as well.
3. When choosing a gas credit card, keep the following in mind: Instead of cash back, you might prefer a gas card that offers rewards points that you can redeem for travel. Maybe you don't want to pay an annual fee. Whatever your preferences are, you should pick a gas card that fits your lifestyle and spending habits.