Get Clear Answers About the 10 Types of Credit Cards

A secured card is a credit card linked to an account, with the money in the account serving as collateral for the credit line you are given. Secured credit cards can help you re-build or establish a credit history so you can qualify for credit cards with no account attached in the future.

A secured card makes it possible for you to make purchases that can only be made with a credit card (like purchases online) if you have poor, bad or no credit. A merchant who accepts credit cards will not know if it is secured or not – the card looks like a “regular” unsecured credit card.

Credit Limits do Apply

The credit limit for a secured card is based on your previous credit history and the amount you have in your account. The limit is a percent of the amount in the account and is usually between 50% and 100%. The money in your account can be claimed by the credit card company for various reasons, including being late on or more payments, including the minimum payment, or failing to make payments (default).

What They Look For

Credit card issuers look for some basic things when deciding if they will give you a this type of secured credit card, including serious delinquencies in the past with other secured card companies, evidence of a steady income, and a previously-established checking or savings account in good standing.

To mitigate their risk, they want to be sure that you have maintained a positive balance in your other secured accounts, and some will ask that you set up automatic payments from one of your existing accounts. 

Be sure to ask these five questions BEFORE you sign on the dotted line:

1- Will I carry a balance? If so, a secured card is not for you, because the APR and annual fees are generally much higher for secured cards than “regular” credit cards. The reason for having a secured card is so that you can build (or re-build) a consistent and responsible credit payment history.

2- In what situations will my deposit be garnished (taken by the issuer)? One late payment? Defaulting on a payment? Find out the exact scenario so you are prepared.

3- What is the true cost of the card?
It is crucial to understand not just the required cash deposit, but all the fees and costs of the card. In particular, be sure you know the annual fee, the APR, application fee, any processing fees, and if you will be required to pay “insurance” (don’t). It is actually possible for most or all of your credit limit to be taken up by fees, so be careful.

4- Does the credit card issuer report my payments to all three top credit bureaus (Experian, TransUnion, and Equifax), and does it report that the card is a secured card? To establish a good payment history that results in a positive credit report, your payments need to be properly reported to the bureaus and it is much better if the card is not also reported as a secured credit card. To check that your payments have been reported, check your free credit report.

5- How long does it take to qualify for an unsecured card? It might be hard to get a straight answer to this one, as it depends on a variety of factors, but it is worth asking anyway, and the answer can give you some insight to if you are dealing with a reputable institution who has your best interests in mind.

A prepaid card is a card that has value stored on a computer chip on the card itself (a “stored-value card”) or in a central database. Unlike a secured credit card or debit card, it is not linked to an account or a specific person. It is not a credit card. You “load” the card with funds and then draw down the balance each time you use the card.

A gift card (or “cash card”) is a common form of prepaid card that can be used only for a specific merchant. Prepaid calling cards are another example. Prepaid cards that are branded with the AMEX, Visa or MasterCard logo can be used anywhere debit cards from those networks can be used.

These cards are also called “teen cards” since so many parents give these cards to their children instead of cash. Interested in the NEW teen credit card from Fidelity?

Be sure to ask these four questions BEFORE you purchase a prepaid card:

1- Am I trying to build (or rebuild) my credit history? If the answer is Yes, then a prepaid card is not for you as it is not actually a credit card, and will not influence your credit history. You should consider a secured card or a regular credit card.

2- What are the fees associated with getting and using this card? Watch for initiation fees and fees to add more value to the card. The fees for prepaid cards can be quite high. Note that prepaid credit card fees change often – be sure to read the Terms and Conditions for your card very carefully.

3- Where can the card be used (online, only at one store, at any ATM)? Some can only be used for one merchant, or a particular group of merchants (a “mall card”).

4- What happens if I need to return merchandise or have a complaint about a purchase or company I have done business with? There is very little recourse when you make a purchase using a prepaid card and then want to file a complaint. Consider using a regular credit card or secured card when making major purchases.

A Reward cards usually gives you back rewards depending on the different types of credit cards–in the form of points or cash back. These cards base their percentage on your spending habits, like how much you pay in groceries or how often you eat out in restaurants, and other categories. Some like to offer bonus points, too, for very popular activities, and they are willing to pay more for these.

Get cash back in interest to your Bank of America, Wells Fargo, Chase or Citibank accounts with a HOT, PINK Yotta Credit Card!

How Do I Redeem My Points or Cash?

There are often a few kinds ways to redeem your points or cash, for example, statement credits, cash back to your checking or savings accounts, or gift cards.

These cards can be used for common, everyday purchases, helping you rack up a large amount of points or cash. But remember, there is usually an ANNUAL LIMIT on the amount of cash back you can receive.

Unexpected bills? High-interest credit card debt? You might be able to consider using different types of credit cards to pay down debt or past due bills: a balance transfer credit card can help you gain control and pay down that bill or debt. The best balance transfer cards let you receive an introductory 0 percent APR for a period between 15 and 21 months, depending on the card. This gives you a break from paying high interest fees or charges on overdue debt.

UPFRONT Fees

Most cards require an upfront balance transfer fee of 3 percent or 5 percent, although there are some existing credit cards with no balance transfer fee. After taking the balance transfer fee into account you could be saving a significant sum of money on interest during your card’s introductory APR offer. What’s an APR?

There are several types of credit cards in the business arena. Business credit cards permit their cardholders to keep personal and business expenses separate. It is possible to also earn rewards on business transactions and spending, which is an overall win for the employee.

Best for EMPLOYEES

Interestingly enough, business credit cards can also be rewards style credit cards, cash back credit cards, travel credit cards or even secured credit cards.

TIP: MAKE SURE you do have a business or income-producing activity to qualify for this credit card.

There are different types of cards in the Travel Credit Cards category. They can offer you an opportunity to win rewards toward travel, and earn flexible travel credits you can use toward your next travel purchases. Sometimes points are offered to you can use to then transfer to prominent airline or hotel programs.

Some travel cards allow you to earn points within a specific airline or frequent flyer program, such as United or Delta, for example, or hotel rewards program like Mariott.

These credit cards are offered exclusively through retail stores, like Amazon or Macys. You charge your purchases at the stores either online or in person and then pay them off gradually over time or all at once. Store credit cards like these are generally only used for the specific store that offers them, although even that is not necessarily always true: some store cards can be used for a related stores or groups of stores.

The Banana Republic Rewards Card: get bonus points each quarter that you make a purchase at Gap, Banana Republic, Old Navy, or Athleta

IF you can pay off your store card easily on time, you can take advantage of great perks and rewards programs that they offer, basically for free.

TIP: Store branded credit cards have HIGH interest rates–more so than more typical credit cards. They are also most likely to charge deferred interest, so your interest might start out low then go really high.

Credit cards aimed specifically to students are labeled “starter credit cards”: they are geared to young people or youth with a limited or beginner credit history. Application requirements aren’t as difficult to meet as for regular credit cards, so it’s easier for them to get approved.

Interested in the NEW teen credit card from Fidelity?

Many student credit cards don’t charge an annual fee but they may even offer bonus perks for good grades or rewards for every dollar spent. If used the right way, a student credit card can help young people build credit and start learning about and practicing good financial skills. Consider this when looking at student cards.

Cash back cards are similar to Rewards Cards except that they only pay out rewards in cash, never in points. This can make it easy for you to earn cash back or statement credits when you spend.

Some cards offer a flat rate of rewards while others offer bonuses for travel or eating out. Some cash back credit cards come with annual fee and some come with no annual fee. Rewards vary widely from card to card so you need to do your research.

Branded or “Co-branded” credit cards are store and/or brand credit cards and offered through regular card issuers like Chase, Citibank or others. These types of credit cards can include airline or travel cards that let you earn miles for a frequent flyer program or hotel cards that let you earn points within a hotel loyalty program.

The Banana Republic Rewards Card: get bonus points each quarter that you make a purchase at Gap, Banana Republic, Old Navy, or Athleta

Some branded credit cards partner with retail or commercial stores, but let you use them for non-store purchases as well. Generally, rewards offered by these types of credit cards are limited to a specific brand.