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Credit Card Reviews

Michelle Brooks

Michelle Brooks

Financial Advisor

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If you’re thinking of applying for a new credit card, you have a range of different options to choose from. Credit card providers have become increasingly creative when it comes to offering different types of benefits with their credit cards. As credit cards are one of the primary ways that American consumers borrow money, there are plenty of good deals available. If you spend time researching for the best cards available, you can save yourself some serious cash!

This guide is designed to help you better understand the different types of credit cards currently on offer in the United States. Regardless of which card you decide to apply for, we recommend that you use your card responsibly. Credit card debt typically comes at a high interest rate, which makes it hard to escape should you accumulate too much debt. To take advantage of the various benefits and features of new credit cards, you need to be certain you’re not paying large amounts of interest each month – this would negate the benefits of the card.

Below we will outline the different types of credit cards and how they may be able to help you improve your financial future. Make sure to consider each one before making any decisions on the type of card you apply for.

Rewards Cards

Rewards cards are increasingly popular in the United States. Domestic lenders have been offering large rewards for those who sign up for new rewards cards. You can often receive thousands of dollars in benefits if you sign up for a new card. In addition, when you spend money you will accrue additional points. There are typically seasonal offers from different credit card providers, so it’s important to make sure that you stay up-to-date with who is offering what.

In addition, you should see how much value each point has, and what they’re redeemable for. Many lenders will allow you to use the points for a variety of different benefits, while others will specify what you can use them for. Some rewards cards will offer additional rewards for certain types of purchases. If you purchase a lot of the same type of good, you should look for a rewards card that fits your spending habits.

Pros

Below are the pros of rewards cards:

  • Sign Up Bonus – Sign up bonuses with rewards cards can be extremely large. Some may include over $1,000 worth of rewards.
  • Rewarded Spending – Most rewards cards issue you with rewards points for every dollar you spend.
  • Added Features – Some rewards cards will also have added features, such as travel insurance or buyer’s protection. This helps you get more out of your card. These may not be heavily advertised, so make sure to read the terms and conditions to see the full list of benefits.

Cons

Below are the cons of rewards cards:

  • High Interest Rates – Rewards cards typically have the highest interest rates. This is how lenders compensate for the rewards they offer.
  • Annual Fees – Rewards cards also typically have the highest annual fees. This is another way that lenders compensate for the rewards they offer.
  • Expiring Points – Sometimes rewards points expire quickly, which can make them hard to take advantage of.

Cashback Cards

Cashback cards are a form of rewards card that provide benefits in the form of cashback. For example, a cashback card may provide you with 1.5% cashback on everything that you spend. Some cards will provide you with larger cashback rates depending on the type of purchase you are making. You want to make sure that you’re only using this type of card if you’re going to pay the balance off in full each month. Otherwise, the interest rate will negate any benefit you receive from the card.

Pros

Below are the pros of cashback cards:

  • Automatic Cashback – The main advantage is automatic cashback when you spend. It’s like a small discount on all your purchases.
  • Special Cashback – Some lenders will provide you with special cashback rates depending on what you spend your money on. For example, some cards may offer double cashback on gasoline purchases.

Cons

Below are the cons of cashback cards:

  • High Interest Rates – Like all rewards cards, cashback cards have high interest rates.
  • High Annual Fees – Again, many cashback cards have high annual fees. You should always factor this into any borrowing decision.

Travel Cards

A travel card is the most popular form of reward card. They offer rewards that are specific to travelling. For example, points may be redeemable for flights or hotels. Travel cards also often have other benefits such as travel insurance or lounge access. You should make sure to apply for a travel card that is suitable for where you are located or how you like to travel. For example, look for travel cards that offer miles on the airline that you like to travel with.

Pros

Below are the pros of travel cards:

  • Sign-Up Bonuses – Travel cards typically have large sign-up bonuses that can result in thousands of dollars in benefits for hotels or flights.
  • Air Miles – You can accumulate air miles with partner airlines every time you spend money.
  • Hotel Points – You can accumulate hotel points when you spend money on your credit card.
  • Memberships – You may receive memberships to certain rewards programs via different airlines or hotel chains.
  • Added Benefits – Many travel cards also include added benefits such as travel insurance or lounge access to certain airport lounges.

Cons

Below are the cons of travel cards:

  • High Interest Rates – Travel cards typically have very high interest rates, as do most rewards cards currently available in the United States.
  • Annual Fees – Most rewards cards will have a fairly high annual fee to help lenders compensate for awards.

Balance Transfer Cards

If you’re currently carrying a high balance on a credit card, it can be hard to rid yourself of debt. Balance transfers allow you to transfer your debt to a different credit card with a lower interest rate or interest-free period. Many balance transfer cards will allow you to pay zero interest for up to 18 months! It’s a great way to help speed up paying off your debt.

Pros

Below are the pros of balance transfer cards:

  • Lower Interest – Many balance transfer cards will have lower interest rates than the average credit card.
  • Interest-Free Period – Often, balance transfer cards will offer an interest-free period to allow you some breathing room when paying off your debt. This is the primary benefit of a balance transfer card – look for a long interest-free period.

Cons

Below are the cons of balance transfer cards:

  • Interest-Free Period Ends – Eventually, the interest-free period will end and you will have to pay interest on your remaining debt.
  • Balance Transfer Fee – Some balance transfer cards will charge you a one-time fee for transferring your balance. This will normally be a percentage of the total balance you are transferring. Don’t accept anything above 3%.

Low-Interest Cards

If you’re someone who carries a lot of credit card debt, a low-interest card is typically your best option. If you’re planning on having a credit card balance, we highly recommend you find a low-interest card. Many of these cards have interest rates that are about half as much as those of rewards cards. Keep in mind that many low-interest cards offer no additional benefits.

Pros

Below are the pros of low-interest cards:

  • Low-Interest – The best benefit of these cards is that they have low interest rates.
  • No Annual Fee – Many low-interest cards have no annual fee, this allows you to focus funds on things that matter in your life.

Cons

Below are the cons of low-interest cards:

  • No Benefits – There are typically no added benefits or rewards for using this type of card. You won’t receive any advantages for spending.

Business Cards

Business credit cards are the same as consumer credit cards, except they’re used by businesses. They’re a great tool for business owners who want to have quick access to capital for themselves and their employees. Business credit cards can also provide rewards for the business owner.

Pros

Below are the pros of business credit cards:

  • Easy Access – Using business credit cards can be a convenient way to spend money. It’s also very flexible.
  • Rewards – Many small business credit cards also come with rewards – some in the form of travel rewards, others in the form of cashback.
  • Authorized Users – You can authorize staff members to use credit cards – it’s a good way to give them access to company funds should they need to pay business related expenses.

Cons

Below are the cons of business credit cards:

  • High Interest Rates – Credit cards have higher interest rates than many other forms of finance.
  • Cash Advance Fees – If you want to access cash, you might have to pay a large cash advance fee.

Student Cards

If you’re a college student, you’re probably looking for ways to help bridge gaps in cash flow. It can be hard to come up with money when you’re studying, and you might not have an established credit history to help you apply for financing. But many credit card companies offer low-interest credit cards to students to help them build their credit. It’s a great way to get started climbing the credit ladder.

Pros

Below are the pros of student credit cards:

  • Low-Interest – Low interest rates are typically associated with student cards – lenders know you can’t afford high-interest debt.
  • Easy Approval – Most student can be approved for student credit cards if they are currently enrolled in a college degree.
  • No Annual Fee – Most student cards have no annual fee attached to them.

Cons

Below are the cons of student credit cards:

  • Only for Students – You have to be a currently enrolled student to be eligible.
  • No Benefits – Lenders typically don’t offer additional benefits when you apply for a student credit card.

Cards Building Credit or Average Credit

If you don’t have any credit history, and you’re not eligible for any of the previously mentioned cards in this article, you may want to consider a secured credit card. Secured credit cards are perfect for those who have a bad credit history, or those who need to build credit for the future. Often, obtaining a credit card is the hardest part of the process.

Secured credit cards require you to place a deposit on the limit that you’re extended. For example, if you want a limit of $500, you can place a $500 deposit on a secured card. This means that if you end up defaulting on what you’ve borrowed, your deposit will pay what you owe. It’s an avenue for lenders to reduce the risk they’re exposed to by new borrowers. It’s a perfect way for you to start building or rebuilding your credit. Many lenders will allow you to secure credit cards, you just have to ask!

Remember, these types of credit cards will not come with many additional benefits. They’re purely for building your credit score.

Verdict

As you can see, you have a range of different options when it comes to getting a new credit card. The card that is best for you will depend on your specific situation. You need to consider a range of different factors when deciding on the perfect credit card for yourself. You want to assess what type of borrower you are, what your credit score is, how likely you are to carry a balance on the card, and many more things.

When you do decide to apply for a card, make sure that you have a specific card in mind. The worst thing you can do is apply for multiple cards at the same time. This will greatly reduce your chance of being approved. Each time you apply for a new credit card, an inquiry will be recorded on your credit report and damage your credit score.

Many rewards cards will require you to spend a specific amount of money to unlock the related sign-up bonuses. Don’t spend above what you normally would to unlock these bonuses – the money you waste will outweigh the added benefit of the sign-up bonus.