What You Need to Know About Types of Credit Accounts
By infohub — Dec 12th, 2017
A credit card is essentially a financial tool, a very popular one at that. The effects of using a credit card, both harmful and helpful, depend primarily on the knowledge and skill of the owner. While there are different types of credit card accounts that you can get, it is you who decides how to best use the financial tool. Here are some critical things that you should know about the different options in credit card accounts:
- Secured Credit Cards
These types of credit cards have been specially designed for consumers who have poor credit or zero credit. While using a secured credit card, you need to make a deposit of an amount that equals the credit line offered by your bank (issuing the card). In the failure to pay the balance, the bank aka card issuer could utilize the deposit for covering the due amount. And if you are efficient in paying your monthly balances, you will enjoy an improved credit score.
- Standard Credit Cards
A standard credit card, also called as a ‘plain-vanilla’ card, does not offer any frills and rewards to the customer. But the operation of this type of credit card is relatively easy. A standard credit card is ideal for those who are looking for a straightforward card to delay payments and aren’t really interested in deals and rewards.
With a standard credit card, you can enjoy revolving balances till a specific credit limit is reached. You end up using your credit when a purchase is made. The credit becomes available again after the payment is cleared. This card requires you to pay a simple finance charge to the pending balances each month.
- Cash Back Credit Cards
With a cash back credit card, a certain percentage of all purchase amounts are returned to the user in the form of cash. The user can then redeem the cash as a check, statement credit or direct bank deposit. Some of the common ways of earning cash back include ‘1 percent back on every purchase’ and ‘5 percent back on every purchase in specific categories which keep changing every quarter’. There are several cards that require the user to collect a minimum cashback amount; for example, 20 prior to redemption.
- Balance Transfer Credit Cards
You might come across numerous credit cards that allow you to make balance transfers. However, balance transfer credit cards are the only cards offering reduced introductory rates for transferring balances in a specific time period. The offers on balance transfer credit cards may vary as far as the promotional rate of interest and the promotional period length is concerned.
- Sign-Up Bonus Credit Cards
Today, you can also get credit cards that have sign-up bonuses. These bonuses could be very small (for instance, 10 percent off on the first purchase) or very large (cash back of several hundred dollars). Only users with excellent credit scores get the high-value sign-up bonuses on their credit cards. With these credit cards, a specific amount needs to be spent by the user within the first 3 months starting from the date the account was opened. This qualifies them to earn bonuses.
- Business Credit Cards
As the name suggests, a business credit card is designed especially for use in business. These cards provide a simple method to create a distinction between personal and business transactions. Business credit cards are available in both charge card and standard credit card options. The personal credit score of the user is crucial even for business credit cards.