A credit card may just be a tiny card that fits your palm but can do so much. With the advance in technology, the world is slowly edging away from physical money to use of credit cards. Today, it is no surprise to find several emails from various credit card brands inviting you to apply for their card. In fact, the market has been so competitive to the point that even those who had traditionally been believed to be disqualified from using credit cards can now access them. Research shows that there are at least one billion active credits cards in the US.
Let’s face it; credit cards have formed a major part of our economy for some time now. Study has shown that an average American home owns at least 12 credit cards. Interestingly, many people may have the notion that credit cards are pretty the same in terms of its usage. On the contrary, credit cards have distinct characteristics that set them apart from one another. Basically, there are three types of credit cards; a bank credit card, entertainment card and a travel credit card.
Bank credit cards
If you are a regular credit card user, you may have realized that most credit cards have distinct MasterCard or Visa logos apart from the banks’s name. This may lead you to believe that these cards have been issued by either MasterCard or Visa. This is not the case as these two brands never issue credit cards to customers directly but rather through specific banks.
Notably both Visa and MasterCard brands, are privately held membership entities, but Visa is currently in plans to go public.
Basically, a bank credit card can be defined as a revolving credit line. The moment you get your statement, one may decide to pay part or all of your balance monthly or basically run up the balance once more. Considering that this is a credit line, the account has its preset credit limit that is determined by several factors like credit history, disposable income and so on. However, it is important that a credit card holder manages the revolving credit line. This will be vital in keeping their credit history clean and thus avoiding trouble with the credit cards.
In cases where the cardholder carries the balance rather than paying it off, interest will be charged on the card by the card issuer. This interest can be pretty steep in some cases and may lead one into serious financial trouble. As much as the interest rates vary depending on the issuer, one can expect the average interest rate to be around 18 percent.
Travel and entertainment card
Despite having been issued separately before, travel and entertainment cards nowadays come as one card. In essence, they are a replica of bank credit cards considering that holders of such cards can also charge purchases at given stores and locations. However, the difference comes from the fact that these are offered by the credit card companies directly. The main issuers of these cards in America are Diners Club and American Express.
Before, these types of cards would only be used in entertainment and travel related businesses like hotels, airlines, car rentals and restaurants. However, their use has since expanded to include other establishments like gas stations, department stores and drug stores. A typical travel and entertainment credit card, just like the banks card comes with a menu of features that you can always expect to find a credit card user. These features include luggage insurance, frequent flier miles and even collision insurance coverage in regards to rented cars.
The other distinction you can expect to notice in regards to travel cards and banks cards is that there is no extended credit line for travel entertainment cards. This basically means that the cardholder has to fully pay the outstanding balances for the account to remain active. This can be done on one or even two billing periods. Notably, Diners Club and American Express also offer categorized summaries of expenses that can be charged to the credit cards each year.
House Credit Cards
Unlike the first two types of credit cards, house cards are limited in terms of their usability. Basically, it can only be used or accepted at specific stores. Otherwise known as retail recharge cards, house cards come second in terms of its usability as credit cards. The major issuers of these cards are gas companies, department stores and telephone companies.
House cards have always been preferred by merchants as a form of payment as this helps them form customer loyalty, thus enhancing their overall sales. With a house card, the holder enjoys the convenience that comes with shopping as they do not have to go through a lot of hassle making several transactions. House cards also function by the guidelines adopted by banks credit cards where the holder is given a line of credit whose limit will be dependent on their creditworthiness. This basically means that you may decide not to pay in full your credit card bill every month. It would, however, be notable that most house cards charged an annual interest of between 18 and 22 percent.
Basically, all credit cards come with their own costs when using them. It is therefore your prerogative to take your time and determine the card that best suits your needs. Having seen the various types of cards, their features and uses, it is much easier to pick out what best works for you. Sometimes, all you need to have is one card that can work in multiple ways. For instance, if you are the type that does to carry any monthly balance, then you are better off working with a card that has no annual fee but not before ensuring that you have a favorable grace period for your purchases. When using a credit card, the rule of thumb is to always avoid cards with unfavorable interest calculations, nuisance fees, high interest rates and those with no grace periods.