Nowadays, credit cards are of various types with different fees, interest rates and rewarding programs. When applying for a credit card, it is important to learn about their different types to find the one that will suit best to your lifestyle or financial status. In the following article we’ll look at the credit cards, their types, fees, advantages and disadvantages.
Using your credit card wisely, you can borrow for nothing, get extra protection on your purchases and even get rewarding points. Because of their wide spread acceptance, credit cards are one of the most popular forms of payment for goods and services all over the world.
What is credit card?
Let’s start at the very beginning and give a definition of credit card. Credit card is a card issued by a financial institution authorizing the holder to buy goods or services on credit. Credit cards usually charge high interests and are used for short-term financing. Interests usually start one month after a purchase is made and bank sets credit limits according to the client’s credit rating.
What are types of credit cards?
Standard Credit Card is the most commonly used card which allows to use money up to a certain limit. If your balance is outstanding, you will get a penalty charge.
Reward Credit Card has a much higher bank account and fees and give some advantages such as reward points, cashbacks and other rewards.
Secured Credit Card are great for establishing or rebuilding your credit history. However, it requires a security deposit, which is held as collateral for your account. The credit limit is based on the amount of deposit and may be the same amount or larger.
Limited Purpose Credit Card has some limitations to its use and must be used only for particular applications. This is used for establishing small credits such as gas credits and credit at stores.
What are the advantages of having a credit card?
If you need to buy something expensive that you can’t afford to pay for all at once, a credit card is a solution for you.
Because of its wide spread acceptance, you can use them practically everywhere, especially abroad.
It can be used to buy goods and services over the phone and online.
Credit card can save you time and trouble, as you don’t need to search for an ATM or carry cash.
It can provide financial help in the event of an emergency.
It will be very helpful in building your credit history.
Some cards even offer cashback, loyalty points and other numerous rewards.
You will monitor your financial activities and track your expenses.
Some credit cards offer 0% periods meaning you can have free loan.
What are the disadvantages of having a credit card?
The main disadvantage to credit card usage is its high interests and fees.
It is very easy to spend beyond your means.
In order not to be overcharged, you should save your receipts and check them against your statement each month.
Low introductory rates may be an attractive option, but you should not forget that they last only for a limited time.
Acquiring too much credit card debt can ruin your credit score.
Credit card fraud is a possibility.
What are the fees charged to credit card user?
Annual fee is a yearly fee charged for using the credit card, usually from $25 to $250/year.
Application fee is a fee charged when you apply for a credit card, usually $10 -$50 per application.
Balance Transfer fee is a fee charged when you transfer a balance, usually 1-3% of the amount per transfer.
Late fee is a charge for making less than the minimum payment or payment after the due date, it can be up to $25.
Over-the-limit fee is charged when you have a balance which exceed your credit limit, so you can be fined up to $35.
Choose a credit card that matches your needs. Paying with a credit card is an easy way to make purchases, by using your card wisely and paying your bills on time you will build a good credit history that will help you obtain other kinds of credit in future.