Different Kinds of Credit Cards

There are over 10 different TYPES of credit cards! Who knew!?!  Each kind of card could add – or detract from your credit score… so before you apply, or pay off cards, choose the one that will do the most for you!

• Basic, Standard Credit Cards:  Most of us have a bankcard that allows us to pull money from our checking or savings account.  It says VISA right there on the front of the card, but it’s not a credit card that will contribute to your credit score.  The most common type of credit card allows you to have an unsecured revolving balance up to a certain loan limit.  Credit accrues when you make a purchase using the card and the balance is reduced when you make a payment.  These cards often carry fees in addition to the finance charge on the balance.  Some of the fees are annual, others are charged for late payments or if you charge over your available balance.  Negotiating the lowest fees is to your advantage.
• Secured Credit Cards: These cards work well for people with no credit history, or damaged credit history.  The cards, again carry significant fees, and you should be very careful about using the cards.  The credit scores given for these cards, even with perfect payment history is not as high as a score for a standard or premium card.  Secured credit cards have a high credit lmit based on the deposit you make against the card.
• Awards Cards (Premium Accounts): Cards that offer reward points, travel upgrades or cash back are examples of this kind of card.  They often require certain income limits and net worth requirements, therefore a gold card or premium card might give you a slightly higher score if used appropriately.
• Charge Cards: (frankly, until researching this I didn’t know there was a difference between a credit card and a charge card) Charge cards must be paid in full every month, and therefore they normally do not have a credit limit.  Since the balance is paid off monthly, they do not carry finance charges.  Late payments are usually subject to hefty late fees and card restrictions.
• Prepaid Credit Cards: Prepaid cards are similar to secured credit cards.  They work well for students who are underage and do not need the credit history of a secured credit card tied to their social security number.
• Limited Purpose Cards: These cards are sometimes easier to obtain than regular credit cards, and can only be used at specific locations.  Limited purpose cards are used like credit cards with minimum payments and finance charges.  Store credit cards and gas cards are great examples of this type of credit card.
• Business Credit Cards: These cards are designed specifically for business use and are generally reserved for business owners.  The credit may be extended based on the business net worth, and there may or may not be any personal liability to the owner for the card payment history.

For more information about building credit history, purchasing a home, how to improve your credit scores – contact Steve and Eleanor Thorne 919-649-5058