Types of Credit Cards and How to Select One

by Bob Jones

Almost everyone over the age of consent (18 or 21) has or wants a credit card nowadays and they are taken in almost every establishment. There are three main sorts of credit card common in America.

The first major type of credit card is the travel and entertainment card such as American Express or Diners Card. These have to be repaid completely at the end of the month but are generous with their spending limits.

The second major sort of credit card is the bank card such as Visa, Master Cards, GM, and Ford cards distributed mostly by the banks. The bank defines the spending limit, which in bank parlance, is known as the credit line and each bank offers different terms and conditions.

Banks offer a choice of payment tpes: you may either pay the balance in full with no interest charges or pay the minimum or some part of the balance with a finance charge.

The other major sort of credit card is the retail store card, such as Sears, J.C. Penney, Shell or Mobil. These store cards and the ones from gas companies {often known as fuel cards} are only accepted in specific countries. They hardly ever carry annual fees. There is a large variance in the terms and conditions for these cards.

Different sorts of credit cards present different opportunities. Some are designed for individual consumers, while others are designed in ways that work best for small business requirements. To know what sort of credit card fits your needs, you should look over a few options.

How to Select your Credit Card.

Credit cards have become a part of life for most people living in the west. It's becoming increasingly impossible to avoid them, especially for business people. So, if this is the first time you are thinking of entering into the world of plastic money, here are some of the basic things you should look out for.

First, compare the interest charged on all the credit cards you are interested in. While the rate may not remain fixed for ever, it's always best for beginners to go for the one charging the least interest.

Make sure you study the small print carefully, especially on the other charges that may be applied, like late-payment fees, annual fees, and whether there is a grace period, which is normally given before the finance charges kick in.

Decide which spending limit is most appropriate for a person of your income. Furthermore, the fewer credit cards you use, the better placed you will be to track your spending pattern.

You should compare the services and other features such as the cash back incentives, or guarantees, rebates and such like and check whether the card is accepted widely enough to suit your needs.

You will help yourself by familiarizing yourself with the following terms:

1] Annual Percentage Rate: this is the measure of the annual cost of the credit.

2] Finance Charges: these are the total charges involving the transaction.

3] Period of Grace: This is the period the issuer gives you before he starts charging you interest on new purchases. (Note bene: not all credit cards have a grace period).