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With so many credit card types available, it can be overwhelming to find the right one. There are three basic categories of credit cards that one can choose from. Knowing what they are and a little bit about how each one works can make it easier to find the perfect card.
Reward Credit Cards
Reward credit cards allow one to earn something back for every purchase they make. In this category, there are cash-back cards and travel reward cards. Cash-back cards are available in flat-rate, tiered, and rotating bonus versions. Flat-rate cards offer a fixed cash-back percentage on all purchases, while tiered cards offer separate percentages for each category of spending, such as grocery, gas, or restaurants.
General travel reward cards offer cash-back for all travel-related purchases made on the card, while company-branded cards offer points to use on purchases at specific hotel chains or airlines. SoFi is an all-in-one investing app that helps people make the most of their finances.
According to the experts at SoFi, “If you can responsibly manage more than one credit card – and if you’re like most Americans, you have more than one – you can use different cards to optimize rewards (cash back, points, or miles), annual statement credits, and 0% and low introductory APR offers.”
Low Interest and Balance Transfer Credit Cards
Low-interest credit cards are ideal for those that can’t pay their entire credit card bill each month. Low-interest cards offer a lower interest rate on one’s purchases. They may even have a 0% APR for a set amount of months after opening the card.
Balance transfer cards allow one to move their credit card balance from a big interest card to one with a lower interest rate. Many of these cards run a 15 to 18-month interest-free window for transfers and all new purchases. After that time frame, a variable APR is applied.
Credit Building Cards
Credit building cards are ideal for those with poor credit scores or those new to the world to credit cards. There are three types of credit building cards to choose from. Secured credit cards are great for building credit. They ask for a security deposit that equals the credit limit. This ensures that one can afford their monthly purchase.
Student credit cards are great for college kids just starting out. Proof of college enrollment is required, and these cards won’t offer the perks that other ones may. Alternative credit cards are wonderful for anyone without a credit history. Instead of using the credit history and credit score of applicants, these cards look at income, bank accounts, and employment. The reward with these credit cards is the credit history one can create over time.
Some credit cards will offer perks that overlap among these three credit card types, but most fit nicely into one description or the other. One needs to look closely at what they need and expect out of a credit card before making a final decision. For more information, you can always reach out to places like SoFi.
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