Which type of Credit Card is best for Me?: Part I

Below you will find an outline of the different types of credit cards from which you may choose, along with recommendations of who might benefit from each choice.

Unsecured Credit Cards

Unsecured credit cards, including Visa and MasterCard, are those with which you probably are most familiar. These traditional credit cards can be obtained at banks or other financial institutions, or via mail. In fact, chances are that you probably have an offer for one sitting in your mailbox as we speak!

When you apply and are accepted for a credit card, you will be given a credit limit, based on your credit score and income. The credit limit is revolving, so it replenishes itself once you repay the charges that you make against it. Interest rates on credit cards are quite high, so it always is best to pay off your entire credit card balance each and every month.

Credit cards are convenient financial tools for anyone who can use credit lightly and responsibly. At any given time, you should not charge up more than 30% of your credit limit, so your card should not be relied upon to make ends meet. Credit cards are easiest to obtain with good credit, but individuals with poor credit also can find cards – although with very high interest rates attached.

In addition, credit cards can be good options for individuals who need to build up credit.

Student Cards

Student cards work similarly to traditional credit cards, except that they are provided only to college students. The majority of the college population has not yet had an opportunity to establish credit histories, and lenders know this. Lenders also assume that, should the college student rack up credit card debt, his or her parents probably will pay some of it off.

For these reasons, student cards usually are granted regardless of credit history. Sometimes student cards have extra incentives attached as well, such as special discounts. Student cards usually have higher-than-average interest rates attached to account for the lender’s risk.

Not surprisingly, student cards are recommended for students. It can be very easy to get into debt without experience, however, so cards should be taken out only with a low credit limit. Using student credit cards responsibly can help students to prove their ability to manage credit, which can open up more credit opportunities in the future.

Business Cards

Business cards essentially are traditional credit cards, except that they are provided to companies instead of individuals. Many individuals at the same company may have a card that is charged to the same company account.

Cards designed for businesses often have much higher credit limits than do traditional credit cards. They also may offer other special advantages.

Business credit cards are great financial tools for many business owners, because it allows them to keep company finances separate from their own personal finances.

Go to Part II of this article.