Tag Archives: incentives
Information and Advice on Five Different Types of Credit Cards
How can you find the right credit card for you with so many different types of cards available? The first thing you need to do is start thinking about how you plan on using credit and for what. After you do this, you can start comparing all the different charge cards and credit cards available. Some cards offer you excellent value, and then there are others, which may cost more in finance and interest charges, provide incentives you may find useful. My advice is to research all the varying card rates, fees and benefits before making a decision.
Depending on your needs, you’ll find several different options which can fit what you are looking for. There are some cards aimed toward individual consumers, while others are built specifically for small business needs. To help you figure out what type of credit card would fit your needs, here is some information on five of the most common credit cards available:
- Standard credit cards – These types of credit cards are the most commonly used. They let the user hold a balance on the card all the way up to a set credit limit. After you make a purchase for an item such as a new TV, credit from that balance is used. After you make payments on that balance, that credit is made available to you once again. Keep in mind that finance charges and interest rates will be applied at the end of the month to your balance. You should also be aware of your card’s minimum payment that needs to be paid by a certain due date or be charged late-payment penalties.
- Premium credit cards – Premium credit cards are very similar to regular credit cards except these offer incentives and benefits. I’m talking about those Gold and Platinum credits cards. These offer incentives such as cash back, reward points, or travel upgrades along with many other different types of rewards just for using the card. However, they tend to come with higher fees and you will need minimum income and credit score requirements before you can be qualified for one.
- Prepaid credit cards – These credit cards require money to be uploaded onto the card before it can be used for a transaction. You do not have a renewing credit limit on these either since you are responsible for how much of a balance is loaded up on the card. They work very similarly as debit cards do, but are not dependent on the balance of your checking account.
- Business credit cards – These cards are intended specifically for business use. These cards allow business owners to keep all of their transaction separated between personal and business. They work nearly identical to a standard credit card does with mostly all the same rules and fees.
- Charge cards – Charge cards are basically credit cards without a limit to how much you can charge. The only requirement is that the entire balance must be paid in full at the end of the month. Since the balance is always paid in full monthly, they tend not to come with any finance charges or minimum payments. They ares however, subject to fees, charge restrictions, or card cancellations if you are late on your monthly payments.
Make Money By Spending on Your Credit Card
Tempting though it may seem, there are pitfalls in attempting to overleverage your credit cards using one of the many tactics exposed’ both in popular finance books and online. The reality is that in most cases, lenders have identified and considered any loopholes before the average consumer has heard about them, and if they have not already done so, are sure to correct them quickly.
For example if you swap cards repeatedly so as to keep within 0% interest offers, you risk being penalised by the credit agencies and eventually you will no longer be able to get any cards at any interest rate, or qualify for mortgages or loans.
One essential piece of advice is to ONLY use credit cards for cash-back provided you are not charged any interest. The temptation to use the credit card to gain cash from a cash point can be high, yet by not paying back the card in full at the end of each month, this can be an extremely expensive method of borrowing.
Some advice sources will tell you that cash-back on a credit card, paid off monthly in full is the same as cash-back on a debit card, but that simply is not true; no debit card on the market charges you for getting cash back with your for the simple fact that you are in fact accessing your own funds rather than extending your credit with a lender.
There are other theories that state that since many credit cards lend new customers money at 0%, you can easily borrow this money and put it into a savings account with as high a rate of interest as is available.
The theory is that you will then be earning interest on money you have acquired effectively for nothing and is similar to the idea that you can borrow money as an overdraft from the bank and swap large amounts between accounts in different banks to look as if you have a large income going in and going out.
This is supposed to boost your credit rating – but beware: when considering further credit, lenders are primarily concerned with whether or not payments were made on time rather than the size of transaction moving to an from accounts.
In general it is inadvisable to see interest free credit or 0% interest offers as free loans – these offers do not last forever and if you miss a payment you will actually accrue more interest than if you had a standard rate of interest in the first place!
With many card providers offering incentives to spend you can expect, with normal usage, to receive some reward for your spending – however, spending vast amounts of cash in order to qualify for free gifts, air miles or other similar incentives is not a good investment!
As with any type of credit, borrowing on a credit card can give you access to funds when you need them most as long as spending is kept within affordable limits it can be an extremely useful way of taking care of your outgoings but it needs to managed carefully.