Choosing the Right Credit Card: A Breakdown of Seven Common Types

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Understanding Different Types of Credit Cards

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding credit cards. For any mortgage service needs, call us at 213-732-3074.

1. Rewards Credit Cards

How rewards cards work: Rewards credit cards allow you to earn cash back, points, or miles on your purchases. Depending on your card’s terms, you may earn the same amount of rewards on all purchases or receive higher rewards in specific categories like dining, groceries, or gas. Over time, your rewards accumulate and can be redeemed for cash back, travel, gift cards, or other options depending on the card’s rewards program.

Many rewards cards offer an intro bonus, also called a sign-up bonus, where you can earn extra rewards if you meet a minimum spending requirement within the first few months of opening your account. It’s important to note that you’ll only earn rewards on purchases, not balance transfers or cash advances.

This type of credit card is best for:

• People who want to earn rewards on their purchases
• People who pay their balance in full each month

2. Low Interest Rate Credit Cards

How low interest cards work: Low interest credit cards offer a lower-than-average annual percentage rate (APR), allowing you to save money on interest when you carry a balance. These cards focus on cost-saving benefits and may offer fewer features and rewards compared to other credit cards. The main advantage of a low interest rate credit card is helping you manage debt and reduce the amount of interest you pay over time.

This type of credit card is best for:

• People who may need to carry a balance
• People who want to minimize interest charges
• Those with good to excellent credit, since they’re more likely to qualify for the lowest rate

3. Student Credit Cards

How student cards work: Student credit cards offer features and benefits that cater to college students. They’re typically easier for students to get approved for, but may require proof that you’re enrolled in a college or university. Student credit cards may have lower credit limits, but often offer rewards and perks that cater to student spending.

This type of credit card is best for:

• College students who want to establish or build credit while in school
• Students who can’t qualify for other credit cards

4. Secured Credit Cards

How secured cards work: Secured credit cards require a security deposit that often becomes your credit limit. This deposit lowers the card issuer’s risk and makes it easier to get approved if you have no credit history, limited credit experience, or poor credit. As long as you maintain a positive payment history, the deposit is usually refundable when you close the account or upgrade to an unsecured credit card.

This type of credit card is best for:

• People who need to establish or rebuild their credit
• People who’ve recently been denied a credit card because of their credit history

5. Store Credit Cards

How store cards work: Store credit cards are issued by retail stores and offer rewards and benefits tailored to shopping with that particular retailer. They can be easier to qualify for than other types of cards.

Store cards may offer exclusive discounts and special financing offers for cardholders. Special financing with store credit cards is typically deferred interest, where you need to pay off your balance within a specified time period or you’ll be charged interest on your entire purchase—not just the remaining balance.

This type of credit card is best for:

• Frequent shoppers at specific retailers
• People who need to build or rebuild their credit

6. Co-Branded Credit Cards

How co-branded cards work: Co-branded credit cards are a collaboration between a credit card issuer and specific brands, like an airline, hotel chain, or retail store. Unlike some store credit cards, co-branded credit cards can be used anywhere when they’re associated with a major processing network.

These credit cards provide rewards and benefits tailored to the affiliated brand, often offering higher rewards on purchases made with that brand. Redemption options are typically focused on the brand’s products. For instance, you may be able to redeem points for a gift card for the co-branded retailer, but not for a gift card from another retailer.

This type of credit card is best for:

• People who frequently shop with specific brands or retailers
• People who want perks, discounts, or loyalty status with their favorite brands

7. Business Credit Cards

How business cards work: Business credit cards are designed to meet the needs of businesses by offering business-specific features. These cards typically come with higher credit limits, employee cards, and expense management tools. They often include rewards categories that align with common business purchases, such as online advertising, office supplies, and travel.

This type of credit card is best for:

• Small business owners looking to manage and track business expenses
• Business owners who want to streamline employee spending

Frequently Asked Questions

How Do I Choose a Credit Card?

Choosing a credit card can be tough, even after you’ve narrowed down the type of credit card you want. Just take your time, compare the perks and offers you receive, and select the one that feels right for you at the time. You can always switch cards later if you decide you want different benefits.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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