How To Pick The Right Credit Card For You

January 24, 2014

Closeup of major credit card: Visa, Amex and Mastercard

Credit cards are ostensibly handy when you need instant cash in an emergency. Take care of your credit card responsibly and you won’t be in debt and may in fact, have a better handle on your financial situation than ever before. Credit ratings get a boost if lenders see that you’ve kept your credit card a long time and when they see that you keep to your monthly payments and rarely have any interest incurred. But, over time, what used to be just a simple and handy financial tool now have evolved into a more comprehensive financial program. With so many different types of credit cards available, how do you know which one is the perfect one for you?

The first thing that you have to do is understand the different types of credit cards out there. There are five (5) basic types of credit cards: Standard, Credit Cards with Rewards Programs, Frequent Flyer Credit Cards, Bad Credit/Credit Repair Cards and Specialty Credit Cards. Each of these types serve a specific need or function and you may choose to have one or more of these types of credit cards. Let us try and define each one:

  • Standard Credit Cards – are the most basic and most common among credit cards and easily obtainable from banks and other financial institutions. They are also known as unsecured credit cards which means you don’t have to put up any money to prove that you can pay. Examples of these include Balance Transfer credit cards which you should choose if you want to transfer a high credit card balance onto one with a lower interest rate. Customers are attracted to the 0% introductory APR of these credit cards but you have to watch out for how long this rate is applicable. Low interest credit cards basically have the same low APR introductory offer and are perfect for those times when you need to make a large purchase, say for a wedding or a major event.
  • Credit Cards with Rewards Programs – are mostly geared for customers with a prolific spending habit but with a responsible attitude towards paying their debts on time. These rewards programs usually involve the accumulation of points for every dollar spent and customers can use such points for acquiring more items. There are several types of credit cards with rewards programs: Cash back (with an annual fee for membership), Rewards Points, Hotel or Travel Points (usually with a partner establishment or airline), Retail Rewards (partner with a major retailer) and Gas cards (may be general or brand-specific).
  • Frequent Flyer credit cards – are perfect for those who travel by plane on a regular basis. There are airline specific credit cards through which you accumulate points whenever you buy airplane tickets on that specific airline. Some generic miles cards are suitable for those who have no specific preference for an airline but still travel extensively by air. Just make sure you read the fine print to these credit cards especially for expiry on the miles.
  • Bad credit/credit repair cards – Just because you have a low credit rating doesn’t mean you can’t get a credit card. A secured credit card requires a security deposit preferably with a collateral and is meant for those people who are trying to rebuild their credit histories. Prepaid credit cards are also available for those with bad credit because they’re limited to whatever amount is loaded or transferred into their credit card. It prevents you from overspending.
  • Specialty credit cards – are customized credit cards tailored to answer the needs for a particular group of consumers. For instance, there are Business credit cards that offer low introductory rates and a rewards programs with additional business bonuses thrown into the mix. There are also student credit cards that, although may not have the same set of benefits as a regular credit card, introduces them towards building their own credit history and learning the ins and outs of financial responsibility.