Credit cards come in all sorts. They have different purposes and features, and even promotions that you could totally use to your advantage. Looking for the best travel credit card or the most cost-effective one in your state is just one of the few questions that one might ask around them. The reason why you’d want one is that the majority population actually uses credit and digital money for most of the expenses they sell and buy. This means that having a credit card gives you access to a vast number of goods and services that might not be available if you only have cold, hard cash on your hands.
What are credit cards?
A credit card is a method of payment that gives the user the ability to borrow funds from a financial company, such as a bank, cooperative, and whatnot. This allows the user to purchase items, borrow money, or withdraw cash using a credit you have with a credit card. The convenience, flexibility, and accessibility of credit cards are unmatched, so they’ve become very popular in society. Most institutions that buy and sell offer the option of paying through a credit card. Whether that’s a restaurant, a shopping mall, or even your local hardware shop.
What are the types of credit cards?
There are many types of credit cards. Each of them has its own set of unique features, benefits, and drawbacks. It depends on what the user really needs, so read along and find out which credit card is the best for you.
- Standard credit card – a standard credit card is exactly what the name suggests it to be. It’s the most common type of credit card and is found in most people’s hands. A standard credit card has an existing credit limit, a variable interest rate, and a set of rules that the user must abide by. The said credit limit and interest rate are all based on the user’s credit score, credit history, and other factors that might tell the company what kind of spender the user is. This way, they’d be given a fair offer while also providing assurance to the banks that the user has the capability to pay back such loans.
Standard credit cards also come with different features and promotions. One of those is a reward-based system, where every time you use a credit card, you get something back. This typically comes in the form of cashback, better credit score, or credit points that you could convert to the issuer’s promotional materials.
- Rewards credit card – Rewards credit cards are almost the same as the standard credit card, but it focuses more on the rewards rather than the purchasing, withdrawal of money, and borrowing of funds. They offer more rewards such as cashback, points, or other methods of rewards every time you purchase. Such rewards could be redeemed for different times of items, such as store-specific gift cards, travel points, or other merchandise.
- Secured credit cards – Secured credit cards are credit cards that are specifically designed for a person who has a very poor (or limited) credit history. Since the bank has little to no information about the spending behavior and credit score of the person, they have circumvented this roadblock through secured credit cards. They work by making the users give a security deposit, and that deposit becomes the credit limit for the credit card. Such a deposit is placed in a secure savings account under the bank, and it can be redeemable after the account is closed or the contract is finished.
There are many more types of credit cards that exist. Low-interest credit cards, balance transfer credit cards, and so much more, depending on where you live. The ones listed above are some of the most common ones, and it’s probably what you’ll encounter.