Types of Credit Cards Types of Credit Cards
A credit card is a small plastic card that is used for retail transaction settlement and credit system, in which the credit card user
owes the amount during every transaction to the issuer. Interest is charged and the credit card users can “revolve” their balance. When users
make a purchase, they have to indicate their consent to pay the issuer by putting their signature on a receipt that records details of the card
and the amount to be paid. Verbal authorizations via telephone and online electronic authorization may also be used by certain merchants. An
electronic verification system is used to verify the validity of the card, and if the user has sufficient credit to cover the purchase. There are
also a couple of variations of verification systems.
Secured Credit Cards
A secured credit card is a credit card that requires a cash collateral deposit, which becomes the credit line for the deposit account owned by
the cardholder. A deposit of 100% to 200% of the total amount of credit is usually required for secured cards. For example, if you put $900 in
the account; you can be given credit up to $900. So, your credit limit will either be the amount of your deposit or some percentage above that
amount. You will also be able to acquire more credit if you add to the deposit.
Unsecured Credit Cards
The bank will not require you to deposit an amount as security or collateral. However, you will be issued a credit card with a low spending
limit that may range from a few hundred dollars to one or two thousand dollars, and very high fees. Your spending limit will also be increased if
you continue to prove your ability, and good intentions of making payments in time.
Prepaid Credit Cards
A prepaid credit card is a credit card that functions basically like a regular credit card, but the only difference is that they are
completely controlled by the user, because instead of borrowing against a credit balance, the funds on credit card is prepaid by the holder who
can use them according to needs. The credit limit for prepaid credit cards is the deposit made by you when you opened the credit card account,
which also allows you to add more money in the account when funds are depleted.
Cash Back Credit Cards
Companies usually pay a percentage of the transaction amount when they receive credit card payments, in commission to their bank or merchant
services provider, which they share with the cardholder by giving benefits such as points, air miles, or a monetary amount. The monetary amount
is known as cash back, and cash back credit card holders receive between 0.5% and 2% of their net expenditure as an annual rebate. This can be
credited to the credit account, or paid to the cardholder by cheque or other means.
Instant Approval Credit Cards
"Instant approval" credit cards refer to a system in which credit card applications are, as the name suggests, instantly approved or rejected
by credit card companies based on the information when you apply for a credit card on their website and on the data received from your online
credit report. With instant approval credit card offers, customers typically receive notice of acceptance or approval within minutes of filling
out the online application form.
Low Interest Credit Cards
Credit card companies often a low "introductory" interest rate that carries a variable low interest rate on a credit card. Within a short
period of time, the interest rate for such type of low interest rate credit cards will increase and reach a higher fixed interest rate. So even
if the introductory interest rate can be very attractive, it may cost you more in the long run. Another option, fixed low interest rate credit
cards are ideal if you intend to keep a credit card for an extended period of time. With such type of credit cards, the interest rate is not
variable and will not fluctuate.
|