How to Match the Best Credit Card to Your Needs and Situations
Written by Kasey Ng
Do you know that you can save by using the right type of credit cards? When people apply for credit cards, most of them do not pay attention on the cards’ function. However, it is important to find the most suitable card based on each individual’s need because it helps cutting some unnecessary cost. There are so many different types of credit cards and this article will explain the characteristic of different credit cards, their function and requirement.
Membership & Store Cards: This type of credit cards is best for people who shop in the cards designated stores. A membership rewards card collects points redeemable for cash or discount certificates. You pay with your own credit card, check, or cash but you are required to provide them with the membership rewards card number at purchase. These originate from grocery stores that give you discounts where in return, they track your spending patterns. They have spread to almost all stores now: Safeway, BestBuy, Staples, Office Depot, and many more. They collect your data for marketing and supply management purposes.
Tip:We recommend signing up with them if you shop there more than twice a year.
Store Cards: This type of credit cards is best for people who always shop in one particular store. A store card is basically the mixture of a membership rewards card with a credit card. The store card will give you special treats such as "10% off your first day purchases or $15 off!" Getting a store card is more involved than your membership rewards. They will pull your credit report, just like getting a credit card. A typical trait on store cards is that they are only good for purchases within that store, such as Macy's, Fry's Electronics, Dell Computer, Nordstrom's, and similar.
Note:Failure to pay your department store cards will result in the same credit hit as failure to pay your credit cards. In other words, pay them on time!
Gas Cards: This type of credit cards is best for people who drive extensively in a regular basis. A gas card will give consumers a higher cash rebates or discount for gas purchases. This type of cards is getting popular due to the higher gas price in recent years. Companies usually provide 3% APR on new gas credit cards. To qualify one, companies usually require applicants to be at least 18 years old, and currently in working status.
Travel & Airline Credit Cards: This type of credit cards is best for people who travel frequently during the year. One type of travel cards will give you bonus miles when you make purchases. After you accumulate enough miles, you can redeem the miles and obtain a free airline ticket. Another type of travel cards will give you bonus rewarding points when booking airline tickets, and no extra fees when using the cards abroad.
Cash Back & Rebates Credit Cards: This type of credit cards is best for people who just want to get some cash in return, other than gifts or gas. A Cash Back Credit Card rewards you for using them with cash back incentives and rebate programs. A 5% cash back is equivalent to a 5% discount on your purchases. If you use a cash back credit card for most of your purchases and routine expenditures, that can save you a significant amount of expenditure over the year. Credit cards with cash rebates and incentives usually require a good to excellent credit rating for approval.
Low Interest Credit Cards: This type of credit cards is best for people who plan to carry the balance month to month. There are two types of rates on low interest credit cards: fixed APR and variable APR. Credit cards with fixed APR will charge you the same rate. Credit cards with variable APR mean that the rate on your credit cards is linked to the prime rate. In general, it is better to get a low interest credit card with fixed rate because you can reasonably predict how much interest companies are going to charge you.
Tip:If you plan to pay off the balance every month, it is usually better to use a rewards credit card with higher interest rate because it gives you discounts on your purchases.
Balance Transfer Cards & 0% APR Credit Cards – These types of credit cards are best for people who like to consolidate their credit card debts onto one 0% APR credit card. The primary benefit of a 0% APR credit card is the introductory 0% APR interest rate. By having a balance transfer card with 0% APR, consumers can use it to pay off the debts from other high interest cards and save interest expense. In addition, a 0% APR credit card can help you finance a large expenditure without receiving interest obligation for a period of time.
Note:Be aware of what the transaction fee is for each balance transfer. It can range from anything between 0% to 5% of the balance transfer amount!
Instant Approval Cards: This type of credit cards is best for people who want to apply for credit cards in convenience. When you apply for an instant approval card, you will typically know whether you are approved within 60 seconds. Credit card companies are able to make decision so quickly because they use computers to screen your credit score, social security and personal information. If you satisfy their standards, you will be approved automatically. Although you will get approved instantly, you still need to wait for the companies to mail your cards. Good to excellent credit score is usually required to get approved on this type of cards.
Tip:Applicants are not recommended to apply 2 to 3 cards at a time because it will negatively affect your credit score.
Student Credit Cards: This type of credit cards is best for students who want to build their credit history while in college. A student credit card usually will not give a very high limit since the cardholders generally have little or no income. Many student credit cards also offer 0% introductory interest rate, rewards and cash back, which can also be a significant saving on college expense.
Tip:Students should avoid using the credit cards as a supplemental student loan because it generally charges a high interest rate after the introductory period.
Business Credit Cards: This type of credit cards is best for business owners who need help to generate cash flow and want to get discount when making business purchases. A business credit card usually gives you a very high credit limit since it is used for the whole business rather than the individual. Business credit cards in general offer better benefits and perks than personal credit cards. This includes the current 5% cash back on purchases including dining, travel, office supply, and other business related expenses. Others include low APR balance transfers and long 0% APR promotion periods.
Note:To apply for a business credit card, other than the name and address of the business, an applicant need to provide the gross sale and net profit of the last fiscal year. For more legal policies, please refer to The Real Deal Behind Business Credit Cards.
Do you know that you can save by using the right type of credit cards? When people apply for credit cards, most of them do not pay attention on the cards’ function. However, it is important to find the most suitable card based on each individual’s need because it helps cutting some unnecessary cost. There are so many different types of credit cards and this article will explain the characteristic of different credit cards, their function and requirement.
Gas Cards: This type of credit cards is best for people who drive extensively in a regular basis. A gas card will give consumers a higher cash rebates or discount for gas purchases. This type of cards is getting popular due to the higher gas price in recent years. Companies usually provide 3% APR on new gas credit cards. To qualify one, companies usually require applicants to be at least 18 years old, and currently in working status.
Instant Approval Cards: This type of credit cards is best for people who want to apply for credit cards in convenience. When you apply for an instant approval card, you will typically know whether you are approved within 60 seconds. Credit card companies are able to make decision so quickly because they use computers to screen your credit score, social security and personal information. If you satisfy their standards, you will be approved automatically. Although you will get approved instantly, you still need to wait for the companies to mail your cards. Good to excellent credit score is usually required to get approved on this type of cards.