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A credit card is a magnetized card, linked to an account that has been opened with a bank or retailer, that allows a consumer to spend up to a certain amount, while building their credit history. Credit card holders also have to pay interest on any balances that they owe on their credit card, which is known as the credit card’s interest rate. Credit cards are not only a great way for consumers to build credit and learn responsibility, but may act as a financial safety net for any emergency expenses that may arise. (See How to Get a Credit Card with No Credit Check for more information.)

Because credit cards can be so financially beneficial, many consumers are interested in having at least one in their wallet. However, many first time credit card holders simply do not understand the different types of credit cards. This lack of understanding may unfortunaltey inhibit consumers from receiving the best deal.

Understanding the Different Types of Credit Cards:

After deciding to apply for a credit card, it is important to first gain a good understanding of the different options that are available. The different types of credit cards include:

● Credit cards designed for those with limited or no credit
● Credit cards designed for those with bad credit
● Credit cards with rewards programs
● Student credit cards
● Merchant credit cards
● Charge cards
● Business credit cards

If a consumer has never obtained a credit card, there is a good chance that he or she would fall into the “limited credit” category. Many times, these types of credit cards are also referred to as secured credit cards, because they require the consumer to pay a security deposit before opening the account. This helps to ensure the lender that the card will not be misused, while building a positive credit history for the consumer.

There are a few different choices of credit cards for people with bad credit. Consumers with bad credit will generally have to obtain a prepaid credit card, which is a credit card that allows the consumer to load a balance onto the card. The consumer will only be able to spend this balance and will not be forced to make a security deposit. A prepaid credit card also helps consumers build good credit, without having to open a checking account with a bank.

Consumers with good to excellent credit may be eligible to receive a credit card that features a rewards program. These rewards can including frequent flier miles, cash back, discount travel, gift cards, discounts on auto purchases, and other rewards. There are a wide variety of rewards cards, each with different rewards programs and features.

Student credit cards are designed for students with limited credit. These cards help students begin to build a positive credit history. Students must usually be enrolled in a four year college to be eligible to receive a student credit card. Additionally, these cards are very simple and offer little in terms of rewards or other features.

Merchant credit cards are credit cards that are issued by a specific merchant. Many department stores, gas stations, convenient stores, and other retailers offer these credit cards to their customers. These cards vary in rewards and other features depending on the specific retailer.

Charge cards are credit cards that do not have a specific credit limit. However, these cards require that the card holder pay the total balance of the card each month. If a consumer fails to pay their balance, their card may be cancelled or their may be charged a hefty fee.

Business credit cards are cards that are issued only to business owners and other professionals. Professionals obtain these cards in order to keep track of and manage business expenses.

How to Apply for a Credit Card in 5 Easy Steps:

1. Before applying for a credit card, it is important for consumer to find out their credit score. This will help them determine what type of credit card they are eligible for, as well as make them aware of their financial standing.

2. After determining their credit, consumers should then decide what type of credit card is right for them. Consumers with good or excellent credit may want to obtain a credit card with an attractive awards program. However, those with bad credit may be forced to obtain a prepaid or secured credit card. Additionally, first time credit card holders may want to avoid merchant credit cards and opt for a credit card issued by a bank.

3. Before applying for a credit card, it is also important to consider the features of a few specific cards. The features that need to be considered are:

● Interest rates
● Introductory APRs
● Annual fees
● Policies regarding cash advances
● Balance transfer policies
● Late penalties and other penalties
● Credit limit

Also keep in mind that many credit cards that offer a 0% or low introductory APR may include a high interest rate after the introductory period. Therefore, it is important to select a card that is an overall great deal and fits the needs of the consumer.

4. After selecting one or more beneficial credit cards, a consumer may then apply with the credit card company. This can be done over the phone, by mail, or online. Most credit card holders choose to apply online, as this method is the fastest and most convenient.

5. After applying for a credit card, the company may accept the application right away or send the applicant a letter concerning their decision within a specified amount of time. Once the consumer receives the credit card company’s decision and the card in the mail, they may then activate their card. While obtaining a first credit card may be exciting, it is important to use this card responsibly to ensure a positive affect one’s credit.