Different Types Of Credit Cards And How To Use Them

Every body has had or thought about getting a credit card but, there are many types of cards out there and choosing the best one for your use is equally or more important than having it in the first place. In this article I will go over 3 of the different types of cards and how they should be used.

Secured cards:

Secured cards are cards that you will need to give some kind of security deposit to open the account. Usually your credit line will be exactly the amount of the security deposit. For instance if you give up $300.00 your credit line will be $300.00 for up to 18 months when the lender can see that you are a worthy borrower because you have done well with borrowing your own money. These cards are for those with bad credit or no credit. If you do have good credit this is not the card for you because these accounts usually carry higher interest rates than the typical card.

Rewards cards:

Rewards cards are cards that will offer rewards for purchases made using the card. These cards are for those with good-excellent credit and should be used very carefully. The rewards offered are given to suck people into using the card and hopefully keeping a balance so the bank or lending institution can make some kind of money off of you. However, if you use the card properly you will never pay any interest and you will be able to benefit from the rewards regularly. When you have a rewards card, you should use it for things that you would pay cash for on a normal basis, ie. gas, groceries, electric bill, cable bill... these are all things that you would pay each month anyway. Put these purchases on your reward card and pay them off within the grace period. This way you will benefit from all the rewards that the card has to offer but you won't have to pay the interest involved.

Balance transfer cards:

Balance transfer cards are designed for people with excellent credit in most cases. They are a great way to work your debt down but also a great way to harm yourself so please read this carefully if you are considering getting a balance transfer card. When shopping for a balance transfer card, you need to check 5 things

1. The introductory rate: Most balance transfers will come with a 0% introductory Apr make sure that the interest rate is for balance transfers, sometimes banks will trick you and only apply the intro apr to purchases and make you pay 18.99% on the balance transfer which is the whole reason you are getting the card.

2.The period of time the introductory rate lasts: Most intro aprs will last for somewhere between 6 and 12 months. Make sure that you will be able to pay a good deal of the balance down before the interest rate raises from the intro apr to the standard apr or the balance transfer just won't be worth the hassle.

3. The "go to" interest rate: what is the standard interest rate on the card. If you are transferring a balance from 10% to 0% for 6 months that's great! But, if the go to interest rate is 18.99% make sure you can pay the balance in full within the 6 month period of time or the balance transfer will just end up costing you a good deal of money.

4. The Transaction fee for transfers: Unfortunately most banks are charging 4-5% as a transfer fee for the amount of the balance transfer. This means if you are transferring money from a 10% to a 0% for 6 months with a balance transfer fee of 5% you are not saving a penny this is very important to check.

5. The annual fee: Some balance transfer cards will come with an annual fee to make up for lost time with 0% interest make sure your balance transfer card doesn't have an annual fee.