Different Types of Credit Cards Explained

There are hundreds of credit cards in the market, making it difficult to choose one. You need to get the best credit card to benefit from the Southwest credit card offers. Understanding the different credit card categories can make it easier to choose. The categories here are based on the features or functions they offer. 

However, the features are not mutually exclusive or rigid. The following are the different types of credit cards explained. 

Rewards Credit Cards 

Rewards credit cards offer cashback or points based on the customer’s spending. You can earn back a percentage of your total spending. Some cards offer rewards in specific categories like travel. 

Others offer points on groceries, restaurant dining, gas, and household supplies. The cards offer different ways to redeem the points. Reward cards are a great way to pay for daily purchases and other expenses.

Credit Builder Credit Cards

Credit builder credit cards target consumers who have no or little credit history. They are designed to improve the user’s credit rating. Those with past credit struggles can improve their credit score using these cards. 

They are for making small purchases that one can pay off on time and in full. It allows the user to build trust gradually. People with low credit scores can get approval for the cards. The cards usually have high-interest rates and low credit limits.

Purchase Credit Card

A purchase credit card is ideal for shopping. Users can spend now and pay over a specific period. Big purchases can be more affordable with zero per cent interest over several months. Spreading the cost over several months can make it easier to afford large purchases. Paying the funds on time will help in improving your credit score. Failing to pay the minimum monthly repayments on time will attract fees and penalties.

Balance Transfer Credit Cards

Balance transfer credit cards are ideal for paying high-interest credit card debt. You can get a lower interest rate card to give you a break on high interest. The cards allow users to access a zero-per cent APR for a specific period, usually 15 months to two years. 

It means that you can avoid paying interest as you pay off the debt faster. Most balance transfer cards require an upfront transfer fee, but there are some with no fee. 

Travel Credit Card 

If you love to travel, you can get a travel credit card. You can use the card in different locations without attracting extra fees. You can avoid the high foreign transaction fees when you travel overseas. 

It means that you can use the credit card as often as you need to when you travel. You can use the card to make cash withdrawals at ATMs abroad. Some cards waive the ATM fees, while others charge a small fee. You can also earn rewards points for travel. 


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Conclusion 

There are other types of credit cards, including business credit cards, cash-back credit cards, secured credit cards, and student credit cards. You can also get store credit cards, co-branded credit cards, and low-interest and zero-per cent intro credit cards.

Sources:

https://www.bankrate.com/finance/credit-cards/different-types-of-credit-cards/
https://www.moneysupermarket.com/credit-cards/types-of-credit-card/
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