Choosing a credit card can be a complicated task. It was much easier when a credit card offer came from your bank or your credit union. Nowadays, credit card offers come from all sorts of retailers.
The credit card business is just that, a business. As with any business, the competition can be fierce.
Interest rates, annual fees can vary greatly and the terms for each card offer are not always the same.
Do not just accept a card offer on the bases that you are approved. Doing so can cause a tremendous financial hardship if you do not understand the terms.
The following explains the types of credit cards that are available to many people. Make sure you understand how each works and choose the type of card that will work best for you.
Zero To Low Interest Rate Cards
These types of cards are ideal for transferring existing high interest rate balances. If you are able to pay off your transfer balance within one year, this could be the card for you.
These types of cards offer a rock bottom interest rate and this can save you a ton of money.
However, the low interest rate offer usually usually returns for a limited time. After the 'special offer period', the interest rate then goes up to the normal 14 to 18 percent. In addition, if you are late only once, the high interest rate can kick in immediately.
If you choose this type of card to transfer an existing high balance, pay it down immediately or the higher interest rate at the end of the 'special offer period' may cause you to pay a whole lot more.
A rewards card is good if you pay your credit balance in full each month. Cash back, airline miles, or points will be insignificant if you have to pay a high interest rate or a high annual fee.
In addition, make sure you understand the redemption policies, as they may be complicated, unfavorable or hard, if not impossible, to meet the card conditions.
The key again is to pay off the balance each month so that you do not pay for the benefits by paying lots of interest.
A Secured Credit Card is ideal for someone trying to re-establish credit. Your bank or credit union may offer a secured credit card, so make sure to ask.
Be aware that annual fees and application fees may apply and interest rates are high and can vary broadly so shop around for the best deal.
You are also going to have to make an initial deposit on a secured card and your credit limit will be relative to the amount you deposit.
Student Credit Cards
College students beware! Students can easily qualify for these types of credit cards and usually do not need to have established credit.
These cards most always come with very high interest rates and a student with no experience handling a credit card can quickly build up lots of interest charges and late fees.