Although there are many benefits to credit cards, they also have certain drawbacks borrowers should be aware of. If you are interested in learning everything there is to know about credit cards, continue to read the sections below.
Different Types of Credit Cards
- Commonly used by small business owners, business credit cards offer notable benefits. One obvious benefit is they allow small business owners to separate personal business finances. Like personal credit cards, a business credit card has several bonuses you can take advantage of. But unlike personal cards, you can obtain business-related perks like purchase protection or return protection.
- Another credit card you can apply for is a travel credit card. These are one of the best credit cards if you are a frequent flyer and want rewards that accommodate this lifestyle. If you rack up enough points, you can receive perks like free checked bags, discounted hotel rooms and more.
- The last card on this list is the cashback credit card. This card is typically used for everyday purchases and has the most flexible amount of rewards than any other card. Instead of accumulating points, you must decide how to redeem cash. Depending on the card and bank, you can earn cash rewards between 1 and 6 percent.
Pros and Cons of Credit Cards
Despite the obvious accumulation of debt, credit cards have several benefits for borrowers. If used responsibly, you may see perks build month after several months of use. This is the first perk of having a credit card, being that it is a great way to build credit. Even if you have a poor credit score, you can find credit cards for bad credit to help you rebuild it.One downside to credit cards are the high APRs. Credit cards have higher interest rates and come with more fees than a traditional loan. If you do not pay off your balance every month, extra charges will add up quickly. Although many credit cards offer cash advances, the interest rates on these advances is even higher than purchases.
Whether it be student credit cards or small business credit cards, reward points are one of the biggest benefits. Accumulating rewards can be beneficial in the long run, but rewards make it easier to overspend. This becomes an issue when spending over 30 percent of the credit limit. Breaking this 30-percent rule can damage your credit score.
How to Get Approved for a Credit Card
Finding the best credit cards is about timing and research. For example, applying for a credit card when you cannot afford to pay the balance every month is not a good idea. If you have a budget you stick to and a consistent income, then getting another credit card is a viable option. Checking your credit score is another important factor to getting your credit card. Credit issuers will run your credit and if it does not meet their requirements, then they will not approve your application.Once you know your credit score is in good standing, research and browse credit cards. You will find many credit cards with a slew of unique offers. Thus, making sure you know what you want before browsing helps you make a good decision.
