Various types of credit cards
There are basically three types of credit cards:
There are various bank cards, depending on your credit rating and income.
- Secured Credit Card:
This card is usually reserved for those trying to establish or rebuild credit. If you have a poor credit history, e.g., a history of late or missed monthly payments, a past bankruptcy, foreclosure, default or repossession, this is one way to begin rebuilding your credit. The interest rate is higher on secured cards than that charged for other types of cards, and you will probably have to pay an application fee and an annual fee.
Typically, you deposit your own money (a minimum of $250) and you can then charge purchases using the card up to the limit of your deposit. After 12-18 months of timely payments, you will be eligible for a standard or classic credit card.
It should be noted that some companies are now offering credit cards for those with bad or no credit that do not require a security deposit. The application fees, annual fees, and interest rates associated with these unsecured cards are higher than other secured cards. Therefore, these cards should only be used to establish/reestablish credit.
- Standard/Classic Credit Card:
Standard or classic credit cards have higher interest rates and less favorable terms than gold and platinum cards. There isn't really any difference between a standard and classic card. The term "classic" is the Visa brand name for its standard card. Some standard cards have annual fees, although most do not. Credit lines associated with standard cards usually do not exceed $2,000 and do not normally have any associated perks.
- Gold Credit Card:
The Gold card is usually awarded to those who need a larger line of credit, $5000 or more, and have proven that they can charge purchases responsibly. It includes all the benefits of a classic credit card as well as other perks when you charge the purchase, such as purchase protection, rental car insurance, etc.
- Platinum Credit Card:
The Platinum card is awarded to those who need a very large line of credit, sometimes as much as $100,000. Obviously, these card owners earn a lot of money and have proven that they handle larger lines of credit responsibly. The interest rate on these cards is comparable with that charged for gold cards, but platinum cards come with extra perks such as such as reward programs, shopping, dining and travel discounts.
- Titanium Credit Card:
The Titanium card is being offered by some banks, but is basically very similar to the platinum credit card. It is definitely reserved for those who need very large lines of credit, and who have excessive income and excellent credit ratings. The interest rate on these cards is comparable with that charged for gold and platinum cards, but will include additional perks.
- Affinity or Specialty Cards
Affinity or specialty cards, typically a MasterCard or Visa, carry the logo of an organization in addition to the lender's emblem. Usually, these cardholders derive some benefit from using the card, such as frequent-flyer miles or points toward merchandise. The organization solicits its members to get cards, with the idea of keeping the group's name in front of the cardholder. In addition to establishing brand loyalty, the organization receives some financial incentive (a fraction of the annual fee or the finance charge, or some small amount per transaction or a combination of these) from the credit-card company.
Travel and entertainment cards
This category of credit card is considered primarily for business use where you need a card without credit limits. This type of card includes American Express and Diners Club, two cards that do not carry credit limits, but require you to pay off the entire balance every month. Since you cannot carry a balance from month to month like other credit cards, these cards charge an annual fee.
House or store cards
This type of credit card is good only in a specific chain of stores. With each brand of store offering its own credit card, there are literally thousands of these type cards. Most of these stores offer a 10-20% shopping discount to entice you to accept the card, and then carry very high interest rates, usually around 21.9% and even as high as 25.9%.