When building your credit, credit cards can help tremendously. With so many different credit card types, it’s hard to choose from. Each card type has its own features and benefits. However, it’s important to think about what card it best for you.
Secured credit cards
If you have little to no credit, a secured card may be right for you. In addition, if you have bad credit, this type of credit card can help to improve your credit score. With secured cards, you need to deposit some money as a guarantee that you will pay back what you spend. Usually, the deposit is the same as your credit limit. It is recommended to start with around $300 for a deposit. But you can deposit up to $1,000. The deposit can is returned when you stop using the card or the card graduates. This mean your secured card is switched to a regular credit card. Capital One and Discover are great secured credit cards to start with.
Student credit cards
Just as the name implies, these credit cards are for college or university students. Generally, the limits and interest rates on these cards are much lower. The goal of this type of card is to help students get familiar with credit. Students can build and keep a good credit history if used properly. On the other hand, if not used properly, students can build a bad credit history. With this type of card, you have to be careful how much you spend and pay on time. Missed payments can hurt your credit score and cause debt problems in the future.
Store credit cards
Generally, as your credit improves with secured and/or student credit cards, store credit cards are the next step. These cards are issued by specific retailers, such as department stores, gas stations or online shops. With this type of credit card, the card can only be used with that specific retailer. For example, if you are approved for a Walmart credit card, that card can only be used at Walmart. They have lower limits and higher interest rates than other credit cards. On the other hand, they usually offer benefits. You may receive discounts, coupons or loyalty points.
Standard credit cards
Standard credit cards are the most common type of credit card. You will have a set credit limit and the interest rate will depend on your credit. When you spend money on your card, the interest rate fee is applied each month. You can either pay the balance in full or part of it. It is suggested that you pay the balance in full each month to lower the amount of interest you pay. Some cards may charge an annual fee.
Reward credit cards
Reward credit cards give you some type of benefit for using them. Normally, they have an annual fee. The annual fee usually cover the benefits the card has. Benefits can range from points to cash back to miles or discounts. These benefits can be used for gift cards, merchandise, travel, etc. Compared to a standard credit card, the annual fee and interest rate tends to be higher. It is a great choice for those who are disciplined about paying off their balances each month.
Business credit cards
This type of card is for business owners or employees who need to pay for business-related expenses. These expenses can include travel, supplies or equipment. Generally, these cards have higher credit limits and interest rates than personal cards. They may offer some benefits such as rewards, cash flow or tax deductions. In addition, they can help separate personal and business expenses, and track and manage spending.
With so many different credit card types to choose from, there are a few things to consider. How are your spending habits? What is your financial situation and financial goals. These factors can help you choose the type of card that’s right for you.
