An Introduction to Credit Card Types

Credit cards have become an integral part of modern finance, bringing the concept of lending to a new level by giving consumers the ability to borrow money from their bank with the swipe of a card. The majority of Americans have owned or will own a credit card at some point in their lifetime, and this is not surprising, considering how many types of credit cards there are.

Each credit card type appeals to a different market of prospective card holders, which is why it can be difficult to decipher the difference between card types, or choose a specific type of card that would be most suitable. The following information outlines the main types of credit cards available for consumers to consider.

Rewards Credit Cards

Rewards cards are perhaps the most popular types of credit card because they offer an incentive for card holders to make frequent purchases. Rewards cards come in many different variations, including airline rewards cards, gas rewards cards, and merchant-specific rewards cards that provide benefits and discounts at certain retail outlets such as department stores. Although rewards cards may be enticing at first glance, many of them carry higher interest rates, so it is important to consider this while comparing prospective credit cards.

Student Credit Cards

Student credit cards are specifically designed to accommodate the needs and preferences of young adults, particularly college students. Most student credit cards do not require a credit history, which makes them a perfect option for first-time card holders. Student cards also have low credit limits, and many of them offer rewards programs as well.

Balance Transfer Credit Cards

Balance transfer credit cards charge no fees for balance transfers, which makes them incredibly useful for debt consolidation. These cards are often used to transfer the balance from a card with a higher interest rate, in order to pay off the balance at a lower rate. In fact, many balance transfer cards also include zero percent introductory interest rates, which allow the card holder to pay off existing balances with no interest charged if completed within that time period.

Business Credit Cards

Business credit cards are ideal for many businesses, from corporations to “mom and pop” shops. These cards help business owners separate expenses associated with the business from personal living expenses, while also offering multiple employee cards, lower interest rates, and other benefits geared towards businesses. The interest paid on a business credit card can be filed as a tax deduction at the end of each fiscal year.

Regardless of the type of credit card chosen, it is always best to compare key factors like interest rates, introductory periods, late fees and penalties, and rewards benefits, before deciding to apply for a specific card. Contrary to popular belief, it is best to apply for one card at a time, as being denied for too many in a short time period could have a detrimental impact on the credit score.