Choosing a credit card is not an easy task. There are over 1,500 credit cards to choose from, and they all offer completely different benefits and risks, so it’s hard to know which is right for you.
The good news is, knowing which type of card is right for you will make it a lot easier to pick the right one for your financial needs.
Let’s talk about the different types of credit cards so you can make the right decision for you!
Is It Time For A New Card?
With new laws and regulations, and new standards being imposed by the credit giants all the time, there are some things that come to your attention that may make you reconsider your options.
Interest rates get higher, new fees get attached all the time, and the rewards program you signed up for may have gone away. There are plenty of signs you need a new credit card. Look here for more.
Different Types Of Credit Cards
All credit cards fall under two different umbrellas and both have their pros and cons. Here’s what you need to know about unsecured vs secured credit cards.
Unsecured Credit Card
Unsecured credit cards are the ones that most of us have, and the types we think of when we think of credit cards. They have higher interest rates and lower limits because they have no collateral.
An unsecured card is great if you’re responsible with your finances and have a steady income. Paying these off on time every month will likely offer you good rewards like flyer miles or points that you can spend.
However, if you don’t pay these off on time, that interest can be a lot. If you owe $10,000 on a credit card and make the minimum payment every month, you could easily be have accumulated interest of $2,000 to $3,000 in just a year.
Secured Credit Card
Secured credit cards are less common, but they do have their benefits. If you can’t get approved for an unsecured card because you have bad credit, or if you’re just looking for a safe way to build your credit and you don’t care about rewards, then this might be the card for you.
These cards have collateral, which guarantees the creditor that they will get their money back, making the interest rates much lower. Often, you put the desired credit limit or a large portion of it upfront for the collateral, and you are essentially borrowing money from yourself, improving your credit score as you do so.
This is a great option if you’re looking for a safe way to build your credit with peace of mind.
Pick What’s Right For You
With the two different types of credit cards, there is no one-size-fits-all option. They all have different features, rewards, and downsides that you have to weigh for your own financial standing.
If you want security when you’re building your credit, choose a secured card. If you want rewards and more freedom, choose unsecured. Either way, keep up to date on our latest financial news so you can stay in good standing!