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Credit Card Types: Which Is Right For You?
When you need a credit card, whether it's your first one or you're just looking for better features and benefits, you have plenty of options to choose from. Nowadays, you can get one that gives you benefits and features that you can actually use, rather than points toward things you would never think about purchasing.
The big three credit card companies are American Express, MasterCard and Visa. These companies join forces with different banks such as MBNA and CitiBank to offer credit cards with different types of features.
The types of features that come with your financing should suit your needs. If you are a frequent traveler, you could benefit from those offered by airlines in which you earn frequent flyer miles per dollars charged or you earn bonus airline miles or points that you can redeem for plane tickets. This type often charges an annual fee on top of any interest on a balance, and the interest rate is usually higher than non-reward cards. Read the fine print, some miles you can use with any airline, but others are restricted to a certain airline. Many of the frequent flyer miles accrued can only be used on certain dates, and if you don't use them within a year they might expire.
If you have financing with a high interest rate, you can search for a balance transfer option many of the large companies offer. Many of these offers come in the mail, so your search could be as easy as walking to your mailbox. When you transfer your high interest balance you'll get an introductory lower interest rate, oftentimes 0 percent if your fico score is good, for a limited amount of time. This can be a great way to lower or eliminate your debt. The key factor to watch out for is the change in interest rate that follows the introductory rate. If you don't have the balance paid off within 6 months, 1 year or whatever the terms, you will have to pay that card at the higher, regular rate. This can be dangerous if the higher rate is more than 15 percent because it will be harder to pay off your accrued balances.
Cash back financing is popular, and these allow you to earn cash rewards for making purchases. The more charges you charge, the more cash rewards you receive. Most will allow users to earn back 1 percent of the total amount of purchases, not counting finance charges. This type of financing is best for people who can pay off their balances each month because the user can earn back quite a bit of money. Many business owners use this type to gain some cash back on purchases they have to make anyway. Some of these cards charge an annual fee, ranging from $50 to $100.
Reward points cards are similar to cash back financing, except instead of cash you get points that you can trade for gift certificates, electronics, jewelry, pet supplies, hotel rooms and gas. Many have some kind of tier system in which you can get a reward after reaching 1,000 points, or a more expensive award after 5,000 points. Generally, for each dollar you spend you get one point accrued to use toward a redeemable reward. Companies offering this financing may or may not charge an annual fee, up to $100. You can pick your specific type of reward points, like those toward electronics, which means you'll be more apt to use your points instead of letting them expire.
If you don't have a good fico score or if you're trying to rebuild your fico, you can still get a specific type of credit card: the secured card. This type requires collateral. Collateral can be a car, boat, jewelry, stocks or anything else that the lender can trade in to pay off the balance if you can't pay it. Another option is to deposit cash for the amount of financing that will be extended to you. For instance, you could pay $500 to the financing agency and get financing with a $500 limit. That way, you can build your fico by paying off your debt, but if you ever default, the lender already has the balance covered in full from your cash. With so many options, anyone can find a credit card that fits your personal needs.
About the Author Andy West writes for Credit Loan, originally founded ten years ago to help consumers understand all their options for financing, from payday loans to obtaining a credit card. For more information visit Creditloan.com.
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