Types of Credit Cards
Credit cards all tend to be about 3" x 2" and are designed to fit into your wallet. But that's where the similarities end. Since credit card companies are always trying to get new customers, they create all kinds of cards for everyone from parents to college students to pre-teens who want to charge way-too-bright lipstick.
If you're shopping around for a card, here are your options:
These cards let you rack up points that you can then use to buy stuff like gift cards or Keurig coffee machines. Some even let you earn cash back on purchases. If you charge a lot anyway, you might as well get something back for it, right?
Low or 0% Special Rate Cards
That big, fat goose egg might be appealing if you're used to paying 18%, 20%, or more in interest, but don't get too thirsty: that special rate only lasts a little while. After you sign up, you get a low or 0% rate for a few months, but then the credit card starts charging you a regular rate—and that rate will depend on your credit score.
Airline and Travel Cards
If you love the idea of seeing the world, these cards offer special rewards such as free hotel stays or frequent flyer miles. If you're really handy with these cards, you could end up scoring a free trip and you might get additional perks, like free upgrades or travel insurance. Business types who travel a lot love these puppies.
These cards are basically designed for people who are already struggling to pay off credit card debt. If you owe a lot on credit cards already, you can transfer what you owe to a balance transfer card. You'll get charged either zero interest or a low rate for a few months and then you'll be charged the regular interest rate after that.
If you think you can pay off your credit card balance before the regular interest rate kicks in, this type of transfer card gives you a break on that rate. The risk? You might not pay off the card in time, leaving you with lots of debt. Another balance transfer card might look appealing then…and pretty soon you're playing hot potato with your debt when what you really want to play is Call of Duty to really blow that thing to pieces and get rid of it forever.
If you're passionate about a cause, these cards give back to the non-profit or special interest group of your choice. So you can feel good buying that new area rug, knowing that it's helping save the dolphins.
College students get no-frills and low-limit cards that are designed to introduce them to the joys of plastic. These cards can be a great way to get started because the application process is pretty simple and you get a chance to build your credit history gradually.
Maybe you were raised by your granny, who made the best peanut butter cookies in the world but was afraid of banks. She found the revolving doors too scary, so she kept all her money in her knitting basket and paid for everything in cash. You did, too. Good news is you're not in debt. Bad news is you have no credit history, so credit card companies don't want anything to do with you—even though they're happy to send your Chihuahua, Arnold, a pre-approved credit card application.
Them's the breaks.
If you want to get a credit history as good as Arnold's, you might have to apply for a secured card. You'll have to brave the revolving doors and go into a bank to deposit some cash. The cash acts as collateral for the credit card. However much cash you put down is your credit limit. If you pay off your credit card, the cash stays. If you don't, the credit card company can take the cash to pay off your debt.
If you're a high-powered entrepreneur (or just someone with a small business), a business card usually gives you lower interest rates and might give you some breaks on business travel or office supplies. A business card is also handy because it lets you keep personal and business expenses separate, which comes in handy at tax time.
Junior cards are marketed at teens and require a parent's signature. They're meant to give teens and tweens a chance to spend money just like grown-ups—all while making mommy and daddy responsible for the balance due.