The concept of debt has been in existence since the barter system of exchange. As the world has progressed, debt has become more and more of a common phenomenon rather than the previously considered taboo that it was. Now, we have been blessed with technology which has deemed nothing impossible. It is through technology that credit cards, another way of accumulating debt, have come into existence.
A credit card, in simple terms, is a card which allows its owner to make payments on the spot without paying for them immediately. Issuing a credit card involves a revolving account being created by the bank and a line of credit being offered to the holder of the card, from which the individual can borrow money to make payments or acquire cash in advance.
In today’s era, with technology rapidly improving and transactions increasing in number, there is a variety of credit card programs that consumers can choose from. Following are the common types of credit cards:
Standard Credit Cards
These are used for general, everyday purposes and have revolving credit lines i.e. the holder pays a fee before the card is issued and then is authorized to use funds whenever he needs. These cards are targeted towards people above 18 years of age who meet or surpass the minimum criteria for credit set by the institution issuing the card. The institution also sets a credit limit, which means that the holder cannot use funds above that limit. These cards require no deposit in advance.
These are credit cards which involve reward programs that are put in place to entice holders to spend more with such cards. The reward programs are basically perks of being a cardholder. They could be in the form of discounts, cash, or points. The latter can be accumulated and traded for free company merchandise, hotel stay, air miles, etc. Such credit cards, however, are a bit complicated than the normal ones, involving various rules and restrictions. They are ideal for people who are prompt in payments and do not leave monthly balances overdue. Such cards can further be divided into types based on the reward they offer. These types include frequent flier miles, points cards, cash back cards, and premium credit cards.
Secured Credit Cards
Another name for these cards is ‘pay-as-you-go’ cards. As an account is opened, the credit cardholder is required to deposit a certain amount of money. Based on a percentage of this deposit, the cardholder’s credit limit is set. Such cards require an annual fee to be paid for their usage and involve higher interest rates as well. There can be issues with the conversion option which allows the holder to convert their secured credit card to a standard credit card.
Specialty Credit Cards
It is through partnerships, affiliations, service providers and major brand retailers that these credit cards are mainly offered. They are intended for a special purpose and are, therefore, provided to people belonging to particular organizations. Sometimes, organizations that work for a social cause also offer such cards to their members.