Credit cards are a form of revolving credit, unlike loans that have a fixed term and (usually) the same monthly repayment amount throughout the loan term. A credit card comes with a credit limit, up to which a consumer can charge expenses to the card. Unlike installment loans, there is no term or period on a credit card. A consumer can continue to use the card for as long as they want to, provided they haven’t maxed out the credit limit. Here’s a look at some of the basic types of credit cards that are available right now.
Secured credit cards: These cards require a security deposit to open the account, unlike an unsecured credit card that does not require a refundable deposit to use them. Both secured and unsecured credit cards report your credit history to credit bureaus.
Student credit cards: These cards are designed for college students with limited credit. They usually come with low or no annual fees. The credit limit is often low as the applicant’s income is negligible, given that they are a student.
Business credit cards: There are two types of business credit cards – small business cards and corporate cards. A small business card operates like a personal credit card and is normally issued to new businesses. Companies that are larger and have an official credit rating are eligible for a corporate credit card. Credit card companies offer companies the choice of allowing multiple users in the company to use these cards.
Travel rewards credit card: Travelers looking to earn miles or discounts on hotels and travel packages can opt for travel reward credit cards that are great for general travel.
Charge cards: Unlike credit cards that allow you to carry a balance into the next month on interest, charge card users have to pay off the balance every month, failing which a fee will be charged.
Credit cards are easy to use because they are accepted by most merchants. They are handy when you don’t have cash, and many of these cards also reward users with discounts, points, cash back, and more. On the downside, with a credit card, it’s easy to accumulate more debt by spending more than what is necessary. Also, high-interest rates and annual fees may get you into more financial trouble in hard times, unless you are disciplined.
