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Types of Credit Cards

Credit card issuers have developed different types of credit cards to better suit the various needs of their clients. Thus, it is recommended that before you select a particular one you make a research on the various types offered so that you select the right one.

Here is a brief description of the most common credit card types:

  • Standard

    These cards have a credit limit up to which one can have a revolving balance. They are unsecured, meaning that no security deposit is required to be put down in order to prove that the money can be repaid.

    Standard credit cards are the most commonly used ones, applied for the purpose of making purchases. When the latter is executed the holder should make a payment to cover it. At the end of the month, if you have an outstanding balance, then you will be charged a finance charge. Additionally, late payment fees may be charged if the client fails to make the required minimum payment at the end the due date.

  • Reward (Premium) Credit Cards

    The difference between the regular credit card and this one is that the clients of the latter are given different benefits and incentives. Some of the incentives may include:

    • cash back
    • reward points
    • gasoline points/rebates
    • travel upgrades and etc.

    In order to be eligible for such a credit card you should meet some requirements, such as minimum income and credit score specifications. Additionally, they may come at a higher than usual fee.

  • Charge Cards

    This type credit card doesn't have a credit limit and the accumulated balance should be completely paid when the due date comes. Since the balance has to be completely paid, charge cards lack finance charge and minimum payment requirement. Depending on the contract you have signed, a late payment can be penalized by a fee, cancellation of the card or charge restriction.

  • Secured Credit Cards

    These cards are the ones most often recommended when you start building up your credit history. If you want to open such a credit card, then you should place a deposit, which will serve as the credit limit. Additionally, secured credit cards may often come with additional fees, such as an application fee, so make sure you have read over any terms and conditions before applying.

    The low credit lines and additional fees may be worth it if a secured credit card helps you build your credit history or get your overall credit back on track.

  • Prepaid Credit Cards

    Before you can use this type of credit card, you should load money into it. In fact this is what makes prepaid credit cards no credit cards at all but they are widely used and accepted as such. The balance of the card is used for the purpose of withdrawing money to cover a purchase. When additional money is loaded into the card, the credit limit is renewed. Because the balance is withdrawn from the deposit you have initially made, prepaid credit card don't have a minimum payment requirement and a finance charge.

    Prepaid credit cards are very useful for building credit history or repairing bad credit since they eliminate the risk of running up credit card debt and facilitate the budgeting process.

  • Student Credit Cards

    Student credit cards are specifically designed for students who generally lack or have little credit history and therefore have difficulties to get approved for a traditional card. These cards are often lack some of the features, rewards and other benefits of standard cards, but they are still valuable, especially for building credit history.

  • Business Credit Cards

    These cards are business oriented and allow business owners and executives to keep their business and finance transaction separate one from another.

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