Credit cards are beneficial financial resources for businesses and everyday consumers. They provide access to funds necessary to purchase goods and services. As long as you repay the balance, interest, and associated fees responsibly, you’ll reap benefits, including a positive credit rating, higher spending limits, lowered interest rates, and other perks. However, not all credit cards are equal, nor do they target the same markets or serve the same purpose.
Ultimately, it’s essential to do your due diligence to learn more about credit card differences to help you make the most informed choice.
Unsecured Credit Cards
An unsecured credit card is one of the most common and straightforward products. These are cards issued to eligible applicants that don’t require initial deposits. The card is awarded to applicants based on factors like credit history, annual income, and ability to pay.
The interest rates, annual fees, and other charges will vary by company. To get the best rates, it’s best to compare multiple unsecured credit cards for the lowest interest rates and fees.
If approved for an unsecured credit card, you’ll be required to pay the minimum monthly balance and associated fees to keep the account in good standing. The funds can cover everyday expenses, big-ticket purchases, or periodic emergencies.
Secured Credit Cards
Applicants that don’t meet the minimum criteria for an unsecured credit card may have an option to apply for a secured credit card. These cards require consumers to pay a deposit to qualify. The amount you deposit is typically your set spending limit. Once the initial payment is received, you can use the card just as the need arises.
While this concept may not seem like a financial perk, there are several benefits of a secured credit card to consider. It’s an excellent way to rebuild your credit and increase your chances of securing other credit products in the future.
Every time you make a timely payment, the credit card company reports it to the major credit bureaus, which improves your score. The positive track record could make it easier for you to acquire an apartment, home, car, student loan, business financing, and more.
Store Credit Cards
Major department stores and retailers often have credit card options to attract customers and increase sales. While the application process, eligibility requirements, interest rates, and payment stipulations often model secured and unsecured credit cards, customers can only use the cards to purchase products from the issuing company. For example, if a customer is approved for a $500 Walmart credit card, they can use this to buy anything from Walmart’s many locations or eCommerce platforms.
Although your spending options are limited, if you frequently shop with a particular retailer or are interested in making a big-ticket purchase, it’s worth the investment. A store credit card can also help diversify and improve your credit rating (when managed responsibly).
Rewards Credit Cards
Credit card companies are constantly thinking of new ways to encourage consumers to utilize their products and thank them for their loyalty. Rewards credit cards are secured and unsecured cards with perks attached to them. The type and amount of rewards you receive depend on the company, program, guidelines, card usage, and, most importantly, positive account status.
Customers can receive cashback offers on everyday purchases, earn free products and services through point systems, and more. Whether you’d like to save a few extra bucks on groceries every month or you’d like to wrack up points for a free hotel stay, there is a reward credit card to suit your interests.
Unsecured, secured, store, and rewards credit cards are just the tip of the iceberg as the types of credit cards available to consumers and businesses continue to evolve. There are cards for high-risk consumers like recent high school graduates to help them establish credit and build healthy financial habits. Even new business owners can find credit cards with reasonable spending limits to cover basic operational expenses.
Now that you know the basics, you can use the advice above to begin browsing the best credit card options for you. As you review credit card companies and offers, remember to keep factors like brand reputation, eligibility requirements, interest rates, associated fees, potential penalties, and cardholder perks to make the most informed decisions. Lastly, before accepting an offer, ensure you have the means to repay to avoid delinquency, high debt, and credit issues.