Credit Card Types and Features — Part 1

Just as there are a baffling range of credit card issusers there is an almost bewildering range of features and behaviours associated with these cards. The key to finding out which card is right for you is understanding what these various features are so that you can chose the right ones for you.

Types of Credit Card

Thankfully, though there remain relatively few broad types of credit cards the issuing banks are all desperate for your custom as they make huge profits on each and every credit card transaction. Bank base rates have also generally been falling driving further competition in the marketplace and making different products available.

Low-interest Credit Cards

These represent one of the most recent additons to the market. Instead of the typical 20%-odd APR of older cards these credit cards offer an APR of between 10 and 15% (which is still at least 10% above the base rate) meaning that the banks still make considerable profit from these credit cards. As a sweetner these cards also generally offer a balance-transfer service where balances from older cards can be transferred to the new card. This transferred balance generally acrues either no interest or very low interest for an extended period of time (which can be as long as eight months). If you have a significant outstanding balance on a credit card this could save you a considerable amount of money.

The latest evolution of these low-interest credit cards is the 'reward card'. These cards are often issued by retailers or airline companies (which just goes to show how lucrative a market the credit card is) and are often tied in to ariline miles or supermarket and superstore bonus points. Obviously, if you are a frequent flyer or you use one supermarket or superstore exclusively these kinds of bonus offers may well be of benefit to you. If not, check the APR rates and terms of such cards carefully as the offers may hide concealed pitfalls for these cards. If you regularly use a card, however, finding one with the right kind of incentive scheme for you may well pay dividends.

Pre-approved Credit Cards

This is a type of credit card offer that comes pouring throug hthe letter box on an almost daily basis. Based on your name and address the credit card company have performed a preliminary credit check and on the basis of this they are prepared to offer you a credit card. Many of these cards will have high interest rates attached to them; though based on your personal details and your income you may be offered an upgraded card (often a gold or platinum card) with significantly lower interest rates. If you are in the market for new credit cards it may well be worth considering such card offers, but be sure to read the fine print first.

Instant Approval Credit Cards

This can be considered as a variation of the pre-approved credit card described above. Many of the application forms for these types of card come in the mail (and increasingly by e-mail). These cards offer the oportunity of applying for a credit card where only a quick background check is done before the card is issued. In effect this means no wait time bofore the new card arrives.

As always, make sure you do your research and check all the fine print before applying for any type of credit card. Remember, however, that if you are applying for credit cards each application is recorded on your credit history and applying for too many cards at the same time will adversely affect your credit score. Wherever possible use on-line resources to make your chioces then apply for the card itself.