By Brigitte Yuille
Credit card products come in a wide assortment these days. Some credit card programs will ease their terms and conditions and offer perks for people with stellar credit, such as travel insurance, concierge service and free entertainment. Other credit card program may help a person re-establish their credit.
Not all cards are for everyone. The ability to get a credit card will depend on whether you qualify. This is determined by whether you have a history of establishing credit and your ability to pay bills on time. Credit card issuers learn about your credit history by pulling your credit report from one of the three major credit bureaus - Equifax, Experian and TransUnion. Issuers will also review a credit rating known as the FICO credit score. Before you even begin applying for a credit card, check the status of your credit report and make sure it doesn't have any errors that could prevent you from getting the card you want.
Here are the most common types of credit cards:
Standard Credit Cards
Standard credit cards are the general purpose cards that have revolving credit lines. They are marketed to people above the age of 18 who meet or exceed the financial institution's minimum credit criteria. No deposits are needed and the credit limit is established by the credit card issuer.
Many credit cards have reward programs that can influence your spending. The perks may come in the form of cash, points or discounts. Points that accumulate, for instance, can be traded off for free hotel stays, merchandise, air travel car rentals and certificates. However, these credit cards can come with complex rules, limits and restrictions. The key is to try to make sure that annual fees don't end up eliminating all the benefits. Rewards cards are typically best for people who pay their balances off every month. (To learn more, read 10 Reasons To Use Your Credit Card.)
Airline/Frequent Flier Miles: Using these cards can earn airline miles. The miles accumulate and can be put toward future flights. Some programs partner with hotels, car rentals and other travel services. However, you don't want to hold on to the tickets for too long. You will need to stay aware of the expiration date on the miles offered. (For related reading, check out Drawbacks Of Travel Reward Programs.)
Cash Back: Cash back cards literally give some of the money you have spent back to you in cash. Credits range from 1-5%. However, this is usually capped at $500 of spending in "appropriate" categories, depending on the card. When you collect a minimum amount of cash or credit, such as $20 to $50, you can ask to receive it through a check or use the money for a purchase at a designated store. Some cards give a flat amount of money based on all your purchases regardless of how much you spend, while other have tiers with different levels of rewards depending on how much you spend and where the money is spent.
Points Cards: These cards let you earn reward points that can be redeemed for merchandise, entertainment and gift cards. These include points that can be put toward gas, hotel stays and home improvement purchases.
Premium Credit Cards: These are the "gold" and "platinum cards". They are generally referred to as "upscale". They are offered to consumers with excellent credit, which means they've retained this standing for few years, and can afford high credit limits of at least $10,000. These consumers typically have huge salaries and are heavy spenders and travelers. Some cards are offered by invitation only. The interest and annual fees, however, tend to be high. The cards' perks may include 24-hour concierge services or a personal assistant, access to exclusive airline lounges, and worldwide travel and auto assistance.
Secured Credit Cards
Secured credit cards are known as pay-as-you-go cards. Upon opening the account, the card holder deposits a few hundred to a couple of thousand dollars. This determines the card holder's credit line. This limit is often based on a percent of the deposit, which is usually 50-100% of what you put into the account. The cards have an annual fee and higher annual interest rates. Most often, these cards are used to reestablish credit. A person can use the card to make small purchases that they can easily repay. Getting a card with a conversion option makes it easier to switch to a standard credit card, which should be possible after several months of good payment history. (For more on this and other types of credit cards, read Credit, Debit And Charge: Sizing Up The Cards In Your Wallet.)
Specialty Credit Cards
Specialty cards typically are offered through affiliations, partnerships, major brand retailers or service providers. Many specialty credit cards share a partnership between organizations that support a social cause, professional organization or an alumni association. A small portion of the purchase goes
toward the intended organization.
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