If there’s one thing that has truly transformed the way we look at shopping and spending, it’s the credit card. Credit cards have not just changed how we pay for what we buy, but also improved our ability to buy. Although this credit culture fostered by credit cards is still a matter of debate, the fact is that credit cards are now an integral part of our lives and will continue to be so- which is why, it is important to choose the right type of card that you can reap the most benefits from.
Depending on your needs, there are 4 broad categories of credit cards that you can choose from:
1. Unsecured Credit Card
This is the most common type that requires no cash deposit or collateral. You may qualify for this card depending on your credit history, financial strength and earning potential. This type of credit card is most suitable if you can handle expenses in a responsible manner and build good credit by making timely payments. These cards usually come with a spending limit which may increase following a few on-time payments.
2. Student Credit Card
These cards are meant for students with little or no credit history. A student credit card gets approved easily, but usually has a lower credit limit and a higher interest rate. Some student credit cards are secured, and require a cash deposit as collateral.
3. Balance Transfer or Low Interest Credit Card
Some credit cards come with a low interest rate as an introductory offer. Lenders sometimes even offer 0% APR on these credit cards for a fixed period, following which it may carry interest. These cards are most suitable when you want to pay off your high interest debts/ credit card balances. This type of card allows balance transfer, which enables you to close multiple cards and transfer the balance to this new card to save money on interest.
4. Rewards/ Cash-Back Credit Card
This type of card offers you additional benefits in the form of reward points or cash back. For example a ‘Travel Rewards Credit Card’ offers points that can be redeemed when you make travel-related purchases such as a flight ticket or a hotel room. Similarly, a “Gas Rewards Credit Card’ will give you reward points/cash back upon making payments at a gas station, and a ‘Cash-Back Credit Card’ gives you a percentage of cash back on eligible purchases. These cards are most suitable for you if you usually pay off your monthly balances in full and never incur interest. While the APR on these credit cards is usually higher, they come with sign-up bonuses, rewards, and redeemable points, making every dollar you spend, completely worthwhile.
So consider your needs and pick the card that is the right type for you.