With a broad range of options to pick from, it often gets a bit overwhelming for people to select the best credit card. There can be many reasons why you must be looking for a credit card. Maybe you are planning on financing the monthly expenses. Maybe you have a low credit score and are planning to build your credit history. Or, perhaps, you are covering the unpredictable expenses.
Credit Cards: Types and What You Need to Know About Them
The good news is you’ll find a variety of credit cards that are designed to cater to different requirements. Before we discuss the common types of cards, you must know that credit cards can be an expensive way to finance your expenses, especially if you can’t afford to pay the hefty monthly statement bills on time. The high APR and annual fee can cost a bomb. However, if used in the right way, a credit card can help you save some money in the long run. Let’s check out the common types of credit cards.
1) Reward Cards
As the name suggests, these cards earn you some exciting rewards and bonuses every time you make an eligible purchase. Rewards cards are great for those who spend thousands of dollars on grocery shopping, travel, dining out, entertainment, hotel stays, and other purchases every month.
On shopping through the reward cards, you will get free credits, cashback, free miles, and store discounts. Now, the type of rewards differs from cards to cards. Some companies offer rewards only on certain purchases, such as shopping at US supermarkets and gas stations, while others have a flat reward on all purchases.
2) Cards for Building Credit Scores
Another reason you may want to use a credit card is for building your credit score. If you have never borrowed money or you have a habit of paying utility bills late, then there is a good chance your credit score will be low. A credit card can be the easiest way to improve your credit score and become eligible for home loans and other mortgages.
With a credit score building card, you get a low credit limit and high interest. However, the lender will reduce the interest if you pay your bills on time. It will also help boost your credit score, making it easier for you to apply for long-term loans and get your application accepted at a low-interest rate.
3) Purchase Cards
Are you planning to finance a big purchase? Borrowing a loan from the bank isn’t always the feasible option. Besides, you only get a loan when you have an excellent credit score. Purchase cards, on the other hand, are quite affordable. Most companies offer these cards with an interest-free period for a specific duration.
If you manage to clear the outstanding balance before the interest-free introductory period expires, you will be able to finance your purchase without spending a single dime on the interest. While it comes with many rewards and sign-up bonuses, purchase cards require a high credit score.
4) Travel Credit Cards
Using your existing credit card for foreign transactions can cost you a 3% fee or higher on the total amount. If you are a frequent traveler, a travel credit card is your best bet. Not only does it allow you to make foreign transactions for free, but it comes with rewards for purchases. Every time you book a flight, you will get reward points that translate into free miles. It also offers free checked bags and luxury airport lounge access for free. If you travel a lot to foreign countries, you must have a travel credit card to finance your airline tickets and stays.
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