Numerous credit card issuers offer hundreds of different credit cards. In order to choose your first credit card, you must first determine the kind of card you require in light of your requirements. There are many different credit card types, from the most basic with few extras to the most luxurious with numerous perks and advantages.
Regular "Vanilla" Credit Cards
Due to their lack of perks and rewards, standard credit cards are also known as "plain-vanilla" credit cards. Additionally, they are fairly simple to comprehend. If you want a straightforward card and aren't concerned with rewards, you might pick this kind of credit card. You are permitted to carry a revolving balance on a standard credit card up to a predetermined credit limit. When you make a purchase, your credit is depleted, and more credit becomes available after you pay. At the end of each month, a finance charge is added to any unpaid balances. To avoid late payment fees, credit cards have a minimum payment that must be made by the specified due date.Credit Cards With Balance Transfers
While many credit cards allow for balance transfers, a balance transfer credit card is one that does so for a brief period and with a low introductory rate. A balance transfer is a good choice if you want to save money on a high-interest balance on an existing card. There are different balance transfer interest rates; some are as low as 0%, but these typically have restrictions like a fee for each transfer. The more appealing the card is, the lower the promotional rate (and the longer the promotional period). To qualify, you'll typically need good credit, though.Cards with rewards
Rewards cards, as their name suggests, are those that give rewards for using a credit card to make purchases. Cashback, points, and travel rewards cards are the three most common types. While some people prefer points that can be redeemed for cash or other goods, others prefer the flexibility of cashback rewards. Due to the opportunity to accumulate free flights, hotel stays, and other travel benefits, travel rewards cards continue to be a favorite among frequent travelers.Cards for students
Student credit cards are those that are made especially for college students, who frequently have no credit history or very little credit history. A student credit card would typically be easier to get approved for than another kind of credit card for a first-time credit card applicant. Although student credit cards may offer extra benefits like rewards programs or low-interest rates on balance transfers, these aren't the most crucial characteristics for those seeking their first credit card. A student credit card is typically only available to those enrolled in an accredited four-year university.Charge Cards
Charge cards don't have set spending caps, and the entire balance is due at the end of every month. Because the balance must be paid in full, charge cards typically do not have a finance fee or minimum payment requirement. Late payments may result in fees, charge limitations, or card cancellation depending on your card agreement. Typically, you need to have a solid credit history in order to be approved for a charge card.Secured Credit Cards
Secured credit cards are an option for people with bad credit histories or no credit histories at all. A security deposit must be loaded onto a secured card. A secured credit card typically has a credit limit that is the same as the deposit that was made on the card. However, in some cases—such as in the case of a serious default like failing to make a mortgage payment—it might be higher. You should be aware that the balance on your secured credit card must still be paid in full each month.Cards With Subprime Credit
One of the worst types of credit cards is a subprime card. These credit cards, which are designed for applicants with a poor credit history, frequently have high-interest rates and fees. Although approval is frequently swift, even for those with poor credit, the terms are frequently unclear. Federal laws govern the number of fees that subprime credit card issuers may charge, but these laws are frequently skirted by card issuers who look for ways to get around them. Even though subprime credit cards are undesirable, some consumers still apply for them because they have no other options for credit. You have to move forward at your own risk in this scenario.Cards Prepaid
Before using a prepaid card, the cardholder must load funds onto the device. Purchases are made using the available balance on the card. The spending cap is not renewed until new funds are loaded onto the card. Because the balance is deducted from the deposit you've made, prepaid cards don't have finance charges or minimum payments. These cards are not true credit cards, nor do they directly assist you in repairing your credit. Although they are not connected to a checking account, prepaid cards are similar to debit cards. Many people frequently use them as a means of spending less.Limited Function Cards
Cards with a limited purpose can only be used in particular places. Similar to credit cards, limited-purpose cards have a minimum payment and finance fee. Examples of restricted-purpose credit cards include store and gas cards.Enterprise Credit Cards
The use of business credit cards is limited to business purposes. They give business owners a simple way to keep commercial and domestic dealings apart. Standard business credit and charge cards are readily available. Your personal credit history is considered even if you are applying for a business credit card because the credit card company still needs to hold you liable for the balance on the card.Most Commonly Asked Questions (FAQs)
Which rewards credit card is the most effective?
Depending on how you spend your money and which perks are important to you, you can choose the best rewards credit card. A credit card that offers airline miles or hotel points as rewards, for instance, wouldn't make sense for someone who infrequently travels if they rarely leave their home. However, it would be a great option for someone who does. Starting with a cashback credit card is always a good idea if you are unsure of the rewards you want.What are the different credit card types' rates of interest?
Your credit card's interest rate will vary depending on a number of variables, including the card, the card issuer, and your credit rating. In April 2022, the typical credit card interest rate was 20.66 percent.