For the most part, all credit cards essentially do the same thing – they give individuals a line of credit that can be used to make purchases, which they will eventually pay back. However, right now there are numerous types of credit cards available to consumers. Options are great, but they can be overwhelming. How do you know which one is best for you? In another blog we reviewed factors to keep in mind as you search for a new credit card. But before you search for a new credit card, you should know the different types out there. Credit cards will differ in the perks that they offer as well as the purposes that they serve. Below are a different types of credit cards and their uses:
Credit-Building Credit Card
Simple as it sounds, this type of credit card will help you build credit if your score is low or if you are simply trying to establish good credit. Common types of credit-building cards are secured credit cards, unsecured credit-building cards, and student cards.
Balance Transfer Credit Card
These could be a good option for paying off or consolidating credit card debt. These types of credit cards allow the user to move debt from one account to another, hence a balance transfer. Transferring a balance to a credit card with lower interest rates and better benefits can be a way to help pay off that debt quicker.
Low-Interest Credit Card
If you know you have a larger upcoming purchase, a low-interest credit card could work in your favor because it offers a lower ongoing rate or a zero percent introductory APR on a new purchase. The term annual percentage rate (APR) refers to the annual rate charged for borrowing money. It typically includes the interest rate on a loan as well as other fees that are required to take out the loan. This will decrease the amount of interest that will need to be paid back in addition to the initial balance. This type of credit card is also a fallback option in the event of an emergency.
Rewards Credit Card
Have a great or excellent credit score? Then you could be eligible to earn points, miles, or cash back. Typically individuals with excellent credit should consider a rewards credit card. When doing so, think about where you spend your money so that you can get the best of the bonuses offered.
The Bottom Line
Depending on the type of consumer that you are, certain credit cards will be more appealing. Once you have carefully reviewed your options, you can begin the process of applying for the credit card that will best fit your financial needs, credit profile, and goals. There are websites that can assist you when you are trying to deduct your choices and will lay out the pros and cons of credit cards. With credit cards, just be mindful of the importance of paying bills on time. Lenders want to know that you can be responsible with repayments. The biggest obstacle might just be taking time to do research, which will be extremely helpful in the long run.
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