Get Credit Smart: Choosing the Best Credit Cards

by Kyle Taylor on December 2, 2013

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Credit CardWhereas in some parts of theworld people mistrust credit cards slightly, US consumers have fewer qualms about using them. In fact, sometimes the only thing they don’t trust about credit cards is how responsible they will (or won’t) be!

Indeed variety is the spice of life, but with the number of credit cards available, all catering for different needs, choosing one is difficult.

So here’s a guide to the different credit cards and how to choose the best credit card for you…

Standard credit cards

Want a credit card that’s both easy to use and understand? Choose a standard credit card.

Standard credit cards have a credit limit (the maximum you can borrow on the card without incurring a penalty) and a revolving balance up to this. When you make a payment, you use up credit but recover it once you’ve repaid the money. You must make a minimum payment each month to avoid late-payment charges. Any outstanding balance at the end of the month incurs a finance charge.

The best way to choose a standard credit card is according to the interest rate and other fees. Obviously, the lower both are the better.

Charge cards

These work differently to credit cards. There’s no interest rate, no grace period, and no spending limit. Instead, you repay the full balance in one go on the due date. A late payment incurs extra charges.

Charge cards are best if you can cover single repayments and want extra benefits that credit cards don’t carry, including roadside assistance, travel insurance, car rental insurance and 90 day purchase protection). However, check these with the card issuer before taking one on.

Speaking of benefits…

Premium credit cards

Premium credit cards feature standard credit card benefits plus extras, such as cash back, reward points, and travel upgrades. They carry higher fees and cardholders must meet minimum income and credit score requirements. Regular travelers may use one.

These are also the toughest cards to be approved for. The folks over at TotallyMoney.com have some handy tips and a credit card matcher, so you can get an idea of the cards you might qualify for.

Limited purpose cards

You can only use these cards in certain locations. Store cards are one example. They come with a minimum payment and finance charge and are good for specific expenses or if you shop regularly in a certain place.

Secured credit cards

Similar to personal secured loans, you make a deposit as a guarantee.  If you have no credit history or have a bad one, these cards are good because you have the chance to prove you’re (still) a reliable lender.  In spite of the deposit, you’ll still have to make monthly payments on the card.

Prepaid cards

These work a little like a mobile phone top-up. The credit is already placed on them and covered beforehand. The value of any purchase you make is taken from the card’s balance. Once you’ve used the card’s spending limit up, you can either discard the card or add more to it. Prepaid cards are good if you’re prone to overspending.

Business cards

Business cards are perfect for businesspeople. They can use them to separate their business expenses from their personal expenses.

Credit card applicants have a lot of freedom of choice, with credit cards catering to individual needs. You should note, however, that credit cards carry extra charges, or can do if you don’t keep up with repayments. More importantly, you should remember that it’s the bank’s money you’re paying with when you use your card — which means they’ll want it back.

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