A Review of the Credit Card Types
Saturday, March 28th, 2009We often assume since credit cards have been around for many years that everyone knows what types of credit cards 
exist. This article will set forth the different types and their purposes for a better understanding of credit cards overall.
Firstly, do not confuse credit card brands with types. The four major brands of credit cards are: Visa, MasterCard, American Express, and Discover. There are also minor brands as well. These fall into the categories of a specific merchant that has its own credit cards such as Macy’s or Sears, etc.
There is one difference between these credit card brands which is worth noting: Visa and MasterCard do not offer their own cards. They issue them through banks and financial institutions such as JP Morgan Chase, Bank of America, or HSBC, and others. The only value that Visa and MasterCard provide (besides advertising) is that they are the processing entity for the card holders’ transactions.
American Express and Discover cards are issued directly to customers. American Express was formerly known for its marketing to more affluent customers, but in recent years that has changed. Discover was the first card to offer a cash-back option.
The main types of credit cards are as follows:
Line of Credit. Line of credit cards or revolving charge cards as they are also known are those cards which allow a card holder to charge a purchase and then make payments on the balance over a period of time. But, equally important is that these cards give you access to the line of credit which allows you to withdraw an amount of cash under a pre-determined amount for any purpose you so desire.
The advantage on these types of cards is that you are able to make a purchase for something for which you might not have enough cash. Then, you pay back the amount plus interest and other charges every month until it is paid off.
These cards come in a variations which are advantageous to the card holder. You might find a card that is suited for a business customer. Others include cards which offer cash-back and other rewards based on points with which you can make purchases of items that you like, much like a catalog store business. Or, still others allow you to accumulate points towards travel related expenses such as airline tickets, car rentals or hotel rooms.
Charge Cards. These cards are those that require you to pay off the balance in full every month. They are not as common as are the line of credit cards. These cards will charge you a fee if you do not pay off the balance every month and they typically do not charge any interest. American Express pioneered this type of card even though they now offer the more popular revolving credit cards as well. These types of cards have been typically popular with businesses and those who travel frequently for business purposes.
Prepaid Credit Cards. With a pre-paid credit card, you are required to deposit a sum of money into an account and then you are able to make purchases up to that amount. This card does not have a line of credit and only gives you access to your deposited amount much like a debit card offers to the customer.
Secured Credit Cards. Those who choose a secured credit card are most often attempting to rebuild their credit. They, too, like pre-paid credit card holders, are required to place an amount of money into an account. Their credit limit is up to that amount and as long as they pay off the balance and do not go over it, they can rebuild their credit over time. The other mark of a secured credit card is that there is usually a fee to open the account in addition to the deposited amount which makes up the line of credit.
Now that you have a better understanding of the types of credit cards, you will be in a better position to choose which is right for you.
March 29th, 2009 at 5:54 am
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