The Pros and Cons of Different Credit Card Types

The Pros and Cons of Different Credit Card Types

 

The Pros and Cons of Different Credit Card Types.There are different types of credit cards, every type is developed to suit a certain need and individual’s preference. This way, you will understand what kind of bonuses and limitations are associated with each type and thus choose the best card that suits your purchasing and financial behavior. Here within this article, we will attempt to discuss the various forms of credit cards and seek to look at the pros and cons of each.

1. Standard Credit Cards

**Overview:** There is another type called standard credit cards and these are the simple form of credit cards. Most of them do not have elaborate benefits in details, for instances; the credit limit and the interest rate charged on the credit limit.

**Pros:**

– **Simplicity:** Standard credit cards are very simple to understand and to use. Over the years they tend to have fewer fees and charge of a complicated nature as compared to other kinds of cards.
– **Low Annual Fees:** These are offered free in most cases meaning that when you are signing up for a standard credit card, you will not be expected to pay any amount of money at the beginning of every year.
– **Good for Building Credit:** They can be recommended for persons willing to establish or re-establish their credit history, for instance being in their first credit card.

**Cons:**

– **No Rewards:** Standard credit cards fail to offer reward or cash back on purchases implying that you are in fact, not getting a break.
– **Higher Interest Rates:** Such credit cards may have relatively higher interest charges, and therefore not suitable to individuals who have balance on their credit cards.

2. Rewards Credit Cards

**Overview:**Rewards credit cards generally give you back cash back, points or travel points for every dollar you spend. They are for the purpose of issuing quick benefits to the cardholders based on their spending.

**Pros:**

– **Cashback and Points:** Shopping with the credit card will help you to earn points, which in return can be redeemed in form of cash, vouchers, or trip vouchers. This is where the card can be of most value if one uses the card often.
– **Sign-Up Bonuses:** Sign-up bonuses are common with most rewards cards especially if you are able to use the card to make a specified amount of purchases in the first few month.
– **Travel Perks:** There are some added features as to the rewards cards which include travel insurance, airport lounge access and no foreign transaction fee.

**Cons:**

– **Annual Fees:** This means that they only come with an Annual fee which, in essence negates the value of the Reward cards. In order to apply for the position, make certain that the benefits of the position will exceed the price people will have to pay for it.
– **Complex Terms:** The terms of Rewards programmes can be numerous and sometimes complicated, while the rewards can have different categories, limits and validity.
– **Higher Interest Rates:** Rewards cards may come with higher levels of interest, and this is costly for the card holder particularly if the he/she is in the habit of rolling over the balance.

3. Cashback Credit Cards

**Overview:** Cashback credit cards have features where by one is able to get back some percentage of the amount of the purchase that was made. Most people use them in their day to day lives to be able to get cash back for the products they purchase.

**Pros:**

– **Straightforward Rewards:** Cashback cards are learnt by everyone — get a fixed percentage back on most purchases made. This can give one a clear shot at receiving a good income with relatively no much struggle.
– **No Reward Redemption Hassles:**While points or miles can be confusing and come with lots of options of how to redeem them, cash back is simple— it’s either put as a statement credit or deposited into your bank account.
– **Variety of Options:** The cash back credit cards are of varying types; absolute cash back or premium cash back or, high cash back during grocery or at restaurants.

**Cons:**

– **Annual Fees:**You have to know that some cashback cards do have an annual fee associated with them. But, with further research, there is equally many no-fee dating sites available on the internet.
– **Spending Limits:**Some cashback categories may have a cap to the amount of cashback that one can earn or extra bonuses may be offered on this kind of spending and the customer may need to activate it to get a higher rate of cashback.
– **Interest Rates:** Cash back credit cards can also be those extra high – interest with the full advantage being gobbled up if you have a balance.

The Pros and Cons of Different Credit Card Types

The Pros and Cons of Different Credit Card Types

4. Travel Credit Cards

**Overview:** Usually it is the travel credit cards created for those who are constantly traveling and are connected with various rewards and bonuses related to traveling, for example, one gets points for the flights, the hotel, and other travels.

**Pros:**

– **Travel Rewards:** Get points or miles associated with travelling and them can be used to book flights, hotel accommodation, car hire, and the like.
– **Travel Perks:** Us include priority boarding, free checked first bag, insurance, first check in and complimentary travel lounge access privileges.
– **Sign-Up Bonuses:** That’s why many travel cards are accompanied by splendid sign up bonuses that can be spent on the furtherance of travels.

**Cons:**

– **High Annual Fees:** Many travel credit cards have the annual fees and if the benefits of travel are not fully utilized then this fees can be expensive.
– **Complex Reward Structures:** Often it can be quite confusing with different rates of award redemptions, restrictions on award travel dates and the list of the airlines partners.
– **Limited Use:** Travel rewards may not be as beneficial for a person if he or she travels seldom or if many of the options offered when cashing in points are unappealing.

5. Balance Transfer Credit Cards

**Overview:** Bakery credit cards are those which allow you to move debt from other high-interest credit cards and repay at a lower rate of interest.

**Pros:**

– **Lower Interest Rates:** They include an initial 0% purchase and balance transfer rate that enables a consumer to eliminate his or her balance without the obligation of paying interest fees during the offered time span.
– **Debt Consolidation:** Reduce your financial burden through debt slashing; merge all of your credit card balances into one account with a lower rate of interest.
– **Potential Savings:** Take lesser interest on your credit card and pay your dues faster with lower annual percentage rate.

**Cons:**

– **Balance Transfer Fees:** There are normally charges for transferring balance that costs between 3% to 5% of the amount to be transferred. This can partially be offset by the above indicated advantages.
– **Introductory Period:** It should also be noted that in most of the firm’s credit card offer, the 0% APR is given for some period and followed by a higher APR – the standard rate.
– **Credit Score Impact:** Transfer of balance may also involve applying for a new balance transfer card and this process usually results into conducting a hard search on the credit report hence causing reduction of credit scores for some time.

6. Secured Credit Cards

**Overview:** Secured credit cards as the name suggests are meant for anybody with poor or no credit scores to start with. They also hold a cash deposit in order to act as your credit limit which you will have to provide as security.

**Pros:**

– **Easier Approval:** It is easier to get secured cards if one has a low credit rating or no credit history at all; therefore it is good for rebuilding credit.
– **Deposit Refund:** If you manage to pay on the card wisely and creating a good account credit history, the deposit may be refunded when one transfers to an unsecured card.
– **Credit Building:* It is worth to know that the usage of a secured credit card along with paying it in a timely manner can be beneficial in raising your credit score.

**Cons:**

– **Deposit Requirement:** Cash deposit ensures that you lay down cash which in some cases may be an issue if you don’t have the amount.
– **Lower Credit Limits:** Secured credit cards obviously have lower credit limits, which gives one certainlimited when compared to an unsecured credit card if the need arises to purchase some bulky items.
– **Limited Rewards:** As earlier indicated most secured credit cards bear no or minimal incentives or bonuses; their main use is to enable users to build credit.

Conclusion

The selection of the right credit card depends on ones requirements and wants. , while standard credit cards give convenience for spending, the other types offer benefits in form of reward or cash back for spending. There is the travel card which is beneficial to frequent traveler and there is the balance transfer card that assists in dealing with the current debt. Secured cards are one of the best types for credit repair as they help to restore the credit standing that was earlier ruined. When considering the advantages and the disadvantages of each kind of credit card above, you will be able to avoid the pitfalls of the particular type of card and choose the kind that is most suitable for your aspirations as well as your daily life so as to maximize the benefits that you get out of the credit that you have.