Some might say, we’re living in a world where relying on your debit card has gone out of vogue. Paying for most everything with a credit card seems to be the new norm, but with so many credit card options out there, it’s hard to decide which type of credit card is best for you.
Should you choose a popular credit card that offers swanky perks like airline miles or loyalty points? Or do you stick with a no-name option from your trustworthy local bank? And really, what’s the difference between them all?
When deciding which type of credit card is for you, it’s important to think about what you want out of your card as well as your spending track record. As with most financial decisions, your history and credit score will dictate what options are available to you.
There are a lot of bells and whistles like reward points or cash back, but really it boils down to two questions: What do you want from a card? And how strong is your financial history? Here’s a breakdown of the credit card options available on the market.
Cards That Improve Your Damaged or Limited Credit
For college student with scant credit history, there are student credit cards . These are meant for university students and tend to be easier to qualify for.
If you don’t have great credit, there are also secured credit cards. Generally, these require a deposit from the user. A secured credit card functions like a normal credit card except that it has a backstop—the user puts up an amount of money that the issuer will then use if you default.
This is typically a good option for people with bad credit. If your account is upgraded to an unsecured account, thanks to good habits, or is closed in good standing, your deposit is returned.
An unsecured card functions like a normal credit card with the bank offering users a certain amount of credit based on the promise that the user will pay off that card in full every month
Both of these options can help you build credit and eventually and could lead to a card with more perks if you are diligent about paying off your balance every month.
Credit Cards That Save You Money on Interest
If you’re prone to carrying a balance month-to-month, consider a low-interest card. While these types of credit cards don’t come with bells and whistles like airline lounge access, it is the financially prudent option if you have an irregular income and occasionally struggle with credit card debt.
Look for a card that offers an initial rate of 0% APR and then ongoing low interest. Ideally, you still pay your balance in full each month, but if you can’t, you won’t be slammed with purchase interest charges on top of late fees.
Rewards Credit Cards
If you are good about paying off your card every month and never incur interest, you might consider opting for a rewards card. They typically offer large sign-up bonuses and give consumers rewards in the form of miles, cash back, or loyalty points.
It’s important that you pay off your balance in full every month because these cards have higher APRs. If you fall behind on payments, all of the perks and rewards are unlikely to be worth it.
Prepaid Credit Cards
A prepaid credit card is preloaded with money, typically though direct deposit, cash or check deposits, or online transfers from a checking account. Users can use their card like a normal credit card for transactions until that money runs out. Since there is no line of credit, you cannot run up debt on the card.
This is great option for a kid who needs to learn how money works or for adults with bad credit history. However, the problem with a prepaid credit card is that since you cannot accumulate debt, it is impossible to improve your credit score using one of these cards.
Balance Transfer Credit Cards
If you are in credit card debt, a balance transfer credit card could help you pay off your debt at a lower interest rate. Essentially, what this card allows you to do is transfer your debt from one card to another.
However, interest rates and terms vary widely with balance transfer credit cards. Often the introductory rate on a balance transfer card is 0% APR, but once the introductory period ends, the interest rate shoots up. It’s important to pay attention to the fine print if this is an option you’re considering.
How SoFi Money™ Can Suit Your Financial Needs
Overwhelmed by the options and looking for a day-to-day money solution that’s both versatile and reliable? Look into a SoFi Money cash management account. You can save, spend, and earn all in one account.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.