And what’s going through your head is –
“WTF is APR?” “2% cash back on what?” “Why’s it want me to pay an annual fee?”
Let me walk you through it.
There are 4 major types of credit cards you can choose from: Secured, Rewards, Low Interest, and Balance Transfer. If you’re just starting out and not getting approved for any credit cards, secured is really your only option. This type of credit card is similar to a debit card because you need to put actual money on it. Instead of spending the credit as a borrower, you are spending money you already have. This type of credit card shows credit card companies you can be a trusted borrower and it will build credit, unlike a debit card.
Next is my favorite: Rewards. I LOVE rewards credit cards. I think I’ve said this before, but it’s essentially free money. You’re not asked to put money towards anything else besides what you would already be buying, and your credit card company will reward you for using their card by giving you cash back. Sometimes it’s just 1%, sometimes it’s 4%, and sometimes it’s benefits toward travel. The pennies per purchase really add up. Across all of my rewards cards, I have several hundred dollars saved up and I’m keeping the balance to spend on something frivolous and exciting.
Another common credit card feature to look for is low interest. This means if you don’t pay off your balance every month (which you better!), the interest they charge you isn’t as high. Usually, it’s 0% APR (annual percentage rate) for the first 12 or 18 months. This is an awesome feature to have but can be dangerous so BE CAREFUL. My boyfriend used to rack up low interest cards in college and then pay them off when he would work in the summer, then balance transfer (see next credit card) when the 0% APR ran out. This is literally the more anxiety-inducing way to handle your credit and I wouldn’t recommend it for anyone, but he knew how much money he would have and he’s in the 800 club, so it worked out for him.
So that brings me to balance transfer. UGH. I’m not into these cards because, like I said, anxiety. I don’t like carrying a balance on a credit card, and this type is just promoting people to keep a balance. You’re going to want to get one of these cards only if your 0% APR is running out and you’re going to be stuck with a ton of interest. Balance transfer cards will offer a low fee or no fee, 0% interest rate for a certain amount of time on balance transfers, which is essentially putting your debt from one card to another. Again, I don’t recommend them and I’ve never had one, so I don’t have a lot to say on them. If you apply for a credit card and it just so happens to be a low fee balance transfer one, it’s a perk, but you definitely DON’T have to utilize the feature.
So that’s it for credit cards. There’s a lot out there, but these are just the 4 main features to look out for when shopping around for them.
