types of credit card

Understanding and Types of Credit Cards You Need to Know

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Want to make a credit card? If so, it is important to know the meaning and types of credit cards. Credit cards are an alternative that can help you borrow money, help with financial needs in an emergency, and build a good credit history.

A credit card is a card issued by a bank or other financial institution, which allows you to make purchases by borrowing money up to a specified limit. Your credit limit is the maximum amount you can borrow.

You can use a credit card for various purposes such as to make purchases, transfer balances, withdraw cash, and so on. The credit card issuer gives you a certain time to repay the entire amount you have borrowed along with interest.

In addition to monthly interest, usually there is also an annual interest rate that must be borne by credit card holders. The interest rate is the annual interest you pay for borrowing money on your credit card. Interest rates are generally based on market interest rates, your credit history, and the type of credit card you have.

After knowing the meaning of credit cards, then there are several types of credit cards that you need to know. Well, here are some definitions and types of credit cards:

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1. Reward Credit Card

As the name suggests, rewards credit cards offer rewards for purchases made with a credit card. There are three basic types of reward cards such as cashback, points and trips. Some people prefer the flexibility of cashback rewards, while others like points that can be exchanged for cash or other items.

Even so, travel rewards cards remain a favorite among frequent travelers. With a travel rewards credit card, you have the opportunity to get free airline tickets, hotel stays, and other travel perks.

2. Business Credit Card

Business credit cards are specifically designed for business use. This type of credit card is available for businesses of all sizes. In addition, business credit cards can also help entrepreneurs build credit profiles to improve future loan terms.

Business credit cards usually have slightly higher interest rates than traditional loans. The reason is that credit card debt is usually unsecured, which means a higher risk for the lender.

3. Secured Credit Cards

Secured Credit Cards are a type of credit card that is supported by cash deposits from the cardholder. This deposit acts as collateral in the account, thus providing security to the card issuer if the cardholder fails or is unable to make a payment.

Apart from being a deposit, Secured Credit Cards function the same as regular credit cards. Usually this type of credit card is intended for people with a bad credit history or very little credit history.

4. Subprime Credit Card

The definition and type of subprima credit card is one of the worst credit card products. These credit cards are intended for people who have a bad credit history and these cards usually have high interest rates and fees.

Although subprime credit cards carry a high level of risk, some consumers still apply for a subprime credit card because they have no other choice. You should consider carefully if you want to take this type of credit card.

Hopefully this information on understanding and types of credit cards can be useful, especially for those of you who are looking for credit cards. Actually there are many other types of credit cards. For more details, maybe you can ask the credit card issuer’s customer service.