Credit Card Categories

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Credit Card Categories

Credit Cards come in all kinds of colorful varieties and conditions and about the single most important issue with any and all credit cards is the interest rate, especially if you are going to carry a balance at the end of the month. It is wise to always want to get the lowest interest rate possible relative to your financial picture.

A lot of companies are in the credit card business. These days one can obtain a credit card from sources like National Geographic, Ford Motors, GE, BJs Club as well as from banks and other financial institutions.

The conditions are as varied as the cards themselves, ranging from 0% promotional through to 29.99%+ interest rates. There are also variable rate cards and fixed rate cards. Mind you, in the real world there really is nothing like a fixed rate card. All credit cards have a variable rate. This is because these institutions that give out these cards are constantly monitoring your spending and repayments, and as soon as a late payment is recorded somewhere, there goes your so-called "fixed rate" out the window.

All credit cards fall under four major types:

American Express                          Visa                          Master Card                      Discover             

Credit Card Basics

People use credit cards because of their convenience in terms of ease of use. There is no need to carry cash or a checkbook with you in order to make purchases. In fact, even some rental places like car rentals would usually require a credit card before you are allowed to rent their vehicle, hence the importance of having access to a credit card. There is a credit limit above which you cannot spend, and there are usually stiff penalties associated with such abuse. Your interest rate could be sharply increased. You may also be charged an additional penalty.

The ideal situation is to repay all the money you have spent back to the issuer at the end of your monthly statement. This is usually not possible since you may have spent money that you don't have. And so you pay the credit card issuer in installments spread over a period of time. This is where the interest rate on your card is crucial. The higher the rate the more money you would pay. If you continue to just pay the minimum that the card issuer suggests that you do, you be be digging your own financial grave. You will never stop owing them!

Types of Credit Cards

Low Interest Rate Cards

These are cards that have very low annual percentage rates (APR) and usually do not have any benefits associated with them. They are the least expensive kinds.

Rewards Cards

These  types of credit cards offer money back on the amount you spend, usually up to about 2% as some kind of rebate. You may receive a check back from the issuer at the end of the year.

Variable Rate Cards

The interest rate on this type of card varies because it is tied to the prime rate. If the prime rate goes up, the interest rate on the card too will go up. When the prime rate falls, the interest rate too falls. The rise and fall of the interest rate is not proportional to the rise and fall of the prime rate, though.

Fixed Rate Cards

The interest rate on these types of cards is fixed irrespective of the fluctuations of the prime rate and, thus, is not tied to the prime rate. However, there is no such thing as a true fixed rate, because as soon as you violate any of the terms (always take the time to read the small print) of your credit card agreement, your interest rate will go up.

Small Business Credit cards

These are credit cards that are provided for the use by small businesses. The interest rate on these cards are usually quite low with a very substantial credit limit.

Students and Credit Cards

Most college students nowadays have two or more of their own credit cards. The card companies realize the spending power of teens and the fact that together they constitute a formidable economic force with a substantial purchasing power. Card companies therefore advertise heavily to college kids and make it easy for them to obtain a card. The interest rates on these credit cards to college kids are sometimes higher. As always the best strategy is to shop around and look for the best student credit card deal that fits your spending habits. Bear in mind that if you are not 18 years old or above, you are not legally allowed to own a credit card without parental consent.

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The contents of this website are for informational purposes only and do not constitute an attempt at providing financial advise. Please consult a competent and reputable financial advisor if you are seeking financial advice.