So many cards, do you know which one you should choose and apply for?

Have you ever heard friends/families/influencers brag about a certain credit card, and tell you that THIS CARD, THAT CARD is a MUST HAVE? I'm one of the friends who is always bragging about Chase cards and their rewards program, especially the Chase Sapphire. BUT we are not here to talk about that, let's remain focused! I’m covering six (6) of the most common types of credit cards that will help you make an informed decision when you’re ready to apply for your first, third, ninth, or 23rd card.

1. Secured cards: A (cash) deposit is required by the creditor (card company) to reduce their risk. This is usually for people who are ready to build, rebuild, and/or have less than “good” credit. You are to make a deposit that is equivalent to you card limit. For example, you make a $250 deposit, then your credit card limit will be $250.

Pros

• Build your credit

• Easy to qualify for

• Upgrade to a standard card

Cons

• High Annual Percentage Rate (APRs)

• No rewards

2. Standard Cards: You are allowed to spend up to a preset limit on that card.

The standard card gives you a preset limit that you can use for purchases, but once you hit the maximum limit, you are to pay the balance before spending. You must at least make the minimum payment (from 1% to 3%) on the statement balance by the due date to avoid penalties.

Pros

• No interest if you pay the balance off by the due date

• Low APRs based on your credit report

Cons

• Expensive if not paid in full

I previously wrote about how your credit card's minimum payment is calculated. Check it out below

YOUR CREDIT CARD'S MINIMUM PAYMENT

3. Limited-Purpose Credit Cards: Those are your Store and Gas Cards that can only be used for specific stores/retails.

These cards are issued by stores (Target,

Marcus, Nordstrom, BP, Shell, Exxon, etc.), and they can only be used at said stores. They do work like regular credits (standard credit cards) but provide rewards for those specific stores.

Pros

• Great if you often shop at specific stores

• Easy to qualify for

Cons

• Often has high APRs

• Restricted

4. Charge Cards: Spend without limit, but you must pay off your full statement balance each month.

Those are different type of cards, and they work totally different than your standard credit cards. Although there is no preset limit, you must spend what you know for certain that you are able to pay at the end of every month to avoid substantial fees. You usually need to have “excellent” credit to be approved for a charge card.

Pros

• No credit limits

• Reward programs are generous

Cons

• High Annual fees

• No flexibility on payment

It is to be known that some charge cards do allow payment on the balance over a period time with an interest. 

5. Rewards Cards: Same as the standard cards, but offer rewards points such as Travel points, cash back, etc..

Rewards cards are my favourite, they basically reward you for spending in forms of travel points (i.e. Chase Travel, AMEX Travel), general rewards or cash back. With Travel rewards cards, you earn points that you later use for free flights, hotel stays, excursions and more. General rewards, you earn them as you use the cards, then you can usually use the points through the credit cards' partners. Finally, there are the Cash Back Cards where you earn rewards that you can redeem for money-usually a statement credit.

Pros

• No foreign transaction fees (most of the time for travel cards)

• Rewards usually outweigh annual fees

• Get paid to use money that you were already spending

Cons

• Annual Fees (The rewards are usually worth way more than the annual fees if you use the card responsibly and strategically)

6. Balance Transfer Cards: Those cards have low to no introductory interest rates to transfer balances from other credit cards

Balance transfer cards are a great choice for those who have high balances on other cards and are attempting to pay them down. The balance transfer introductory rate usually last between 6-24 months, however, it goes to a higher interest rate once the introductory rate ends. To be approved and obtain low interest rate for balance transfer cards, you usually must have “good” credit.

Pros

• Help pay off credit card balance faster

Cons

• No rewards on transferred balance

• If not paid off by the introductory period, interest rate is usually high

There is a card for every person and almost every situation, you just have to ensure that you read the fine prints, which will help you identify the perks, flexibility, and the terms of the card. Using your cards wisely and paying the balance in full every month will positively impact your credit.

Remember you need credit cards to build you credit! Payment history accounts for 35% of your score and Credit Utilization accounts to 30%. The easiest and fastest way to raise your credit score is by first knowing how your score is calculated. Check it out here

YOUR CREDIT SCORE PIE

That’s it for now!