Secured Credit Cards vs Student Credit Cards

by Allan Guzman Chinchilla
secured credit cards vs student credit cards

Last updated on July 17th, 2020

You’re in high school or college, and you’re ready to start building your credit history by applying for your first credit card. At this stage, your options are very limited because of your age and the fact that you probably don’t have a significant full-time income yet. The two primary choices are a student credit card or a secured credit card; knowing which to select, however, depends on various factors. In this article, we’ll dive into what you should know and what you should consider when deciding which type of credit card is right for you.

Questions You Should Ask

Before getting into which type of credit card you should consider, there are a few conditions you should be mindful of and on which you should evaluate any credit card you look at:

  • The card should help you build your credit. This is arguably the most important factor to weigh since at this early point in your financial lifespan you’ll want to make as much of a positive impact as possible. Some starter cards only report negative information to credit reporting agencies, so avoid those. Look for a card that will report all your good habits – such as on-time payments and low credit utilization ratio – so your credit score can flourish quickly.
  • How much will it cost you to open and have a credit card account? You’ll find annual fees on most travel and rewards credit cards, but some starter cards have them, too. In addition, certain credit card issuers may charge you a fee to open an account. Prioritize credit cards that will be free for you to use so you can put more money towards making responsible payments.
  • Upgrading to a better credit card. Once you’ve shown that you’re a trustworthy borrower of money, issuers may open the door for you to move on to a credit card with a higher limit or additional perks. If you’re not offered a better card, you can also ask for an upgrade to an unsecured credit card.

Student Cards

Student credit cards are traditional, unsecured credit cards that are simply targeted to adults enrolled in school. Among their benefits you’ll find that no security deposit is required, many of them don’t have an annual fee, and some include modest cash back or other rewards benefits. However, in order to qualify for a card for students you’ll have to, naturally, provide proof that you’re enrolled part-time or full-time in school. In addition, you’ll need to be at least 18 years old and provide proof of some type of income. You don’t have to be working full-time, but issuers want to see that you’re earning money so that you can pay back whatever balance you build on your card. If you’re under 21 or don’t have a high level of income, you may need a co-signer to help get you approved. Although student cards don’t ask for a security deposit, their initial limits are quite low. Don’t be surprised if you’re approved for a student card and given a limit of around $800. Even though it’s not a lot of wiggle room, it does help make you disciplined about spending money wisely and on what you need over what you want. Besides, if you make a good impression you may get a limit increase after a handful of months. One more thing to remember if considering a student card is that issuers may still check your credit history when you apply, even if you’ve never had a credit card before. Some issuers are lenient regarding their qualification criteria, while others are stricter. It all depends on the institution issuing the card.

Secured Cards

Secured credit cards are not just limited to students; anyone who doesn’t have a credit history, or is trying to repair their credit, may qualify for one. Like student cards, you may need to show proof of income and your credit history may be inspected, but you have a higher likelihood of being approved for a secured card. Also, like student cards, some secured cards may include rewards programs where you can earn back as you make purchases. These perks aren’t standard, but some issuers offer them on their cards. The defining feature of secured credit cards is the security deposit that issuers will require you to provide in order to use the card. This deposit serves as collateral that the issuer can claim if you’re unable to pay back what you owe. Most secured card issuers have a minimum deposit requirement, although you’re free to deposit more than that. With secured cards, your credit limit will be equal to the deposit you provide. Therefore, if you only give the minimum – let’s say it’s $200 – you’ll only have $200 to spend. But put down $1,000 and your limit will be dramatically higher. Once you’re able to graduate to a better all-around credit card, it’s possible for issuers to reimburse your deposit once you’ve closed the secured account. If you opt for a secured card, you’ll want to be very diligent in fully paying off your statement balance each cycle. Secured cards are notorious for having high APRs, and you could end up paying dearly if you leave a high balance unchecked for an extended period. Your credit overall will also suffer, which is the opposite of what you want just as you’re starting to build your financial reputation.

Alternatives to Applying

If applying for either type of credit card seems difficult, you have a couple of tools at your disposal to increase your chances.

  • Become an authorized user. If you need help establishing a credit history, look to a parent, relative, or trusted friend and become an authorized user for one of their credit cards. It’s especially useful if the main account holder has a long and good credit history because you’ll benefit from their financial stability. Being an authorized user, especially a responsible, one can give you a big boost when applying for a credit card – and it can also give you access to a wider selection of cards.
  • Use a co-signer. Like becoming an authorized user, a co-signer increases your chances of being approved because this person essentially becomes responsible for your debt if you’re unable to pay back what you owe. In this scenario it also helps for the co-signer to have a robust credit history because it will make issuers more comfortable when it comes to lending you money.

Final Thoughts

Student cards and secured cards both have their advantages and disadvantages, and your choice depends on your individual financial and situation. If you don’t want to pay an annual fee but don’t mind a low credit limit, choose a student credit card. If you’d rather have more control of your spending via a deposit of your own money, opt for a secured card. In any case, your first credit card will play an important role in the types of credit that you’ll be eligible for in the future. Try not to get overzealous about your spending once you’re approved, and remember to pay your balance in full every month. Your future self will thank you for it.

Types of Credit Cards: Prepaid Cards

by Cory Santos
types of credit cards prepaid cards

Last updated on April 5th, 2023

A prepaid card looks like a regular credit card, and in many ways, works as one. Instead of borrowing against a line of credit, you load money onto prepaid cards so that you can make purchases at a merchant point-of-sale, such as a retail store or online shop. Reloadable prepaid cards do not require a bank account to use and can have money added to them in many ways.

Prepaid Cards at a Glance

Also sometimes referred to as prepaid debit cards, prepaid cards act more like debit cards than credit cards as you can only use the available balance on the card to buy goods or services. Since they’re associated with major card networks (by way of having their logo printed on the card), prepaid cards can also be used in most places that credit cards and debit cards from those networks are accepted. You can also get paid faster by having your employer make a direct deposit onto your card instead of depositing a paper check and waiting for it to clear.

Trying to make a purchase using your prepaid card that is more than the available balance won’t result in the overdraft fees that debit cards charge, but the sale will be declined. Some prepaid cards will also allow you to make atm withdrawals as you would with debit cards, but for a fee. Make sure you read the card issuer’s terms and conditions to know what actions using your prepaid card will result in fees.

Credit Required

The process of getting a prepaid card is simple, as there are usually no credit checks involved to buy the card or load it up with funds. In fact, you can even use prepaid cards if you have a bad credit history. If you’re trying to make a purchase somewhere that cash isn’t accepted and do not have the credit score to qualify you for a cash back rewards credit card, for example, a prepaid card may be your best option.

Fees

It is more important than ever to manage your money when using a prepaid card if you want to avoid paying a lot of fees. You may be charged fees for setting up your card, fees for reloading it with money, atm withdrawal fees, monthly fees, foreign transaction fees, and even fees for entering your card number online and using it to pay bills automatically.

What to Look for in a Prepaid Card

A prepaid card offers much of the freedom and security that comes with using credit cards, even if your past credit history is otherwise holding you back. Keep these tips in mind when selecting a prepaid card to add to your wallet.

Functional Features: Because every prepaid card works differently, knowing what your card can and cannot do is critical when choosing which one to go with. For instance, some prepaid cards cannot be used to set up recurring online bill payments while others limit the number of ATM transactions you can make. Read the terms and conditions of the card before ever loading it with funds to be sure it will work as you’d like it to.

Easy Reloading Options: Being able to conveniently add cash to your prepaid card is a major selling point, regardless of the issuer. Most cards allow you to transfer money from a bank account onto it, add money from an online payment processing account, have your employer directly deposit your paycheck onto it, reload it at a physical retail shop, or add funds using a separate reload card bought at a store.

Be Aware of “Hidden” Fees: When it comes to prepaid cards, “hidden” fees are likely fees that you didn’t know about because you didn’t read the terms and conditions before purchasing the card. Monthly fees and ATM fees can add up quickly if you’re caught unaware, putting you in a more difficult financial situation than the one you may already be in. Take a few minutes to read the fine print before making your decision to remain informed and aware of potential pitfalls ahead.

Online Management and Monitoring Tools: Because budgeting is so important when using a prepaid card, being able to easily track your spending is as well. Some (but not all) prepaid cards offer a companion mobile app that allows you to see exactly how much you’ve spent on the card and how much you have left, and others grant the ability to reload the card with cash right on your phone or tablet. As nearly everyone has a smartphone on them nowadays, using that tool to keep tally of your finances makes sense… and cents.

Theft Protection: Unlike cash in many situations, you may be able to recover the funds you’ve added to your prepaid card if it’s lost or stolen. Cards that offer zero liability protection make it easy to replace the card and value on it so long as it’s registered with the issuer, so look for that benefit when making your selection as well.

Why Use a Prepaid Card as a Financial Teaching Tool?

Even though prepaid credit cards do not help you build credit (because their use isn’t reported to the three credit bureaus or tied to a bank account), they can still be used to help you build responsible financial habits. Both children and adults can use prepaid cards to make sure they keep to a strict spending budget, whether for key expenses like food or more fun purchases that occasionally get out of hand.

As a parent, a prepaid card can be loaded with lunch money or used to dispense the allowance that your kids earn from chores completed around the house. Not only is it safer than having them only carry cash around, but you’d also be able to monitor their spending history using the card’s mobile app.

A prepaid card can also be used for personal budgeting reasons, such as limiting the money you spend on a hobby or trendy clothing by only using what you’ve loaded on the card each month. You may also want to avoid paying overdraft fees or interest as you would with a debit card or credit card, or you may not have a bank account at all. In any of those scenarios, a prepaid card could come in handy.

Your purchasing power may be limited if you have a poor credit score, but with a prepaid card in hand, you’ll still be able to enjoy some of the perks and experiences that come with having plastic. So long as you budget yourself and carefully read the terms and conditions, you should be able to get by until you get that unsecured card you’re after.

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Prepaid & Debit Cards

How to Upgrade Your Credit Card

by Allan Guzman Chinchilla
how to upgrade or downgrade your credit card

Last updated on April 11th, 2023

Do you have a credit card account that you no longer use, or perhaps one that you’re not getting enough out of? Rather than letting it sit untouched or continuing to settle for less than what you can earn from it, you may consider switching it for a different credit card. Doing so can open the door to new and possibly more rewarding benefits, a lower interest rate, no annual fee, or any combination of the three. However, transferring your account to a new card isn’t always in your best interest, and you’ll want to consider certain factors before you make your decision. How do you upgrade your credit card?

How it Works

Upgrading or downgrading a credit card is as simple as making a phone call to your card issuer and asking. However, the actual process should involve more steps, especially on your part. Different issuers may handle the case differently, so you’ll want to contact yours and ask how their procedure works before requesting a change of cards. Also, be aware that it’s possible the issuer will decline your request, especially if your account is not in good standing. If you want to move up to a higher-tier version of your current card so you can earn more rewards, for example, but you have a longtime outstanding balance or a history of late payments, you could likely be denied an upgrade. In addition to your account, the issuer may inspect your credit report, especially if you’d like a new card with a higher credit limit. Be aware that a card issuer reviewing your credit report will knock a few points off your credit score since it’s considered a hard inquiry. If you wish to change your card to a different product within the same family, chances are you’ll only be hit with a soft inquiry since your credit limit won’t usually change. Once you’ve done your homework, call your issuer and request the upgrade. If you get the green light, you should receive your new card within a few days.

Why It’s Worth It

Arguably the greatest benefit of upgrading your credit card is having a shiny, new piece of plastic (or metal, in some cases) that will potentially earn you rewards points or cash back and offer several welcome perks. For example: If you started out a few years ago with a secured or student card and have outgrown it thanks to responsible use and a higher income, it’s worth graduating to an unsecured card that will give you something extra as you continue your sensible spending habits. Upgrading – rather than applying for a new card – will spare you the hard inquiry from the issuer, which will keep your credit score intact. Plus, a hard inquiry will remain on your report for two years. Both of these bumps could potentially run you into hardship if you decide to make a substantial financial decision in the future, such as buying a house or a car. In addition to leaving your credit score untouched, maintaining your account active looks good for your credit length. Lenders like seeing that you’ve had accounts open for a substantial time because it paints a more detailed picture of you. Even if you were to apply for a new card instead of upgrading, it’s smart to keep the old card account open and making an occasional small purchase to show that it’s active. There are also benefits to stepping back down to a more basic credit card. If you have a high-end card that’s no longer for you because, say, you don’t use it as much as before or the perks no longer apply to your lifestyle, you might save money by no longer having to pay an annual fee or moving to a lower interest rate. A lower-tier card may also have distinct rewards that could end up benefitting you more, such as a higher earning rate on a specific category that you now spend more money in.

When You Want to Apply for a New Card Instead

In some cases, applying for a new credit card – and having your credit report potentially take a minor hit – is better than upgrading an existing account. One instance involves signup bonuses. If you upgrade or downgrade a card, you won’t be eligible for your new card’s welcome offer because issuers usually restrict them to new applicants. A bonus of 50,000 points, for example, is hard to pass up, especially if you already have a growing stash and you know you can meet the spending requirements. Similarly, a big cash back bonus could go a long way if you’re planning on using it for a special occasion. In these situations, you need to weigh the consequences of choosing one option over another, as there is no definitive answer. In addition to signup bonuses, you could potentially miss out on having your new card’s annual fee waived – an offer that some issuers extend to new applicants. The more credit card accounts you have open, the higher your total available credit. If you keep your spending low, you’ll also keep your credit utilization ratio low, which looks good on your credit report and helps raise your credit score. Switching to a new credit card under the same account won’t alter your available credit unless you request a limit increase, so it doesn’t do your utilization ratio any favors. If this is an aspect of your credit history that you’re trying to improve, you’ll have more success applying for a new card instead of switching.

Bottom Line

As with many decisions in life, the correct answer depends on several factors that differ with each individual. Maybe you’re better off upgrading to a different card. Perhaps you’ll enjoy the more long-term benefit of applying for a new card instead. It’s possible that the best scenario is doing both. Regardless of the determination you make, you should always take some time beforehand to evaluate the state of your finances, your lifestyle, and how your spending fits into it all.

Types of Cards: Debit Cards

by Cory Santos
types of cards debit cards

Last updated on December 12th, 2023

When it comes to making purchases, many of us tend to use debit cards and credit cards interchangeably. However, these two types of cards operate in completely different ways behind the scenes. While credit cards allow you to pay for products and services using a line of credit you must repay later; debit cards work by directly drawing money from your bank account. Here’s everything you need to know about debit cards, including distinctions between debit and credit cards, shedding light on how they function and impact your financial well-being.

Table of Contents

At a Glance

  • Debit cards are payment cards linked to a deposit account and can be used to make purchases or other transactions.
  • Debit cards only spend what funds are in the associated account (excluding overdraft fees). Because of this, they charge no interest and typically don’t report to credit bureaus.
  • A growing number of debit cards help build credit with regular reporting to Experian, Equifax, TransUnion, or any combination.

What is a Debit Card?

A debit card is a payment card usually tied to a checking or other deposit account. Debit cards offer convenience by letting you spend the money in your account without withdrawing funds from an ATM.

Debit cards look and pay for purchases like a credit card. After all, with both payment types, you can swipe, use Touch Pay, or enter your card details and card expiration information to make a purchase. Unlike credit cards, however, debit cards don’t charge interest and likely won’t build credit with on-time payments (though some credit-builder options might). Instead, you can spend your money as you wish, with the funds automatically debited from the account.

What are the Benefits of a Debit Card?

Debit cards offer a huge array of benefits. Firstly, debit cards can help you stay within your budget. Since a debit card only allows you to spend the money you have, it prevents overspending and helps you avoid debt. Secondly, a debit card provides convenience. You can use it for online shopping, bill payments, and even cash withdrawals from ATMs.

No Interest Charges

With debit cards, there is no interest charged. As mentioned, you can spend what is in your account with a debit card, with anything over that limit either denied or approved but with an over-the-limit fee. Despite that, there are no interest payments with a debit card or minimum payments due at the end of the month. Make a purchase or transaction, and that amount is debited or credited to your account. It’s that simple.

Surcharge-Free ATM Access

Many banks, credit unions, and fintech lenders offer a robust network of fee-free ATMs. Here is a quick rundown of the fee-free ATM networks for major banks:

ATM network(s) Number of Fee-free ATMs
Bank of America 16,000+
Chase 18,500+
Discover/ Allpoint/ MoneyPass 60,000+
Wells Fargo 12,000+
Co-op (credit union network) 33,000+
USAA/ Allpoint/ MoneyPass/ PNC 55,000+

Convenience

Debit cards streamline the purchase process and eliminate the need for older payment methods, like checks. Currently, approximately 99% of merchants accept Visa, Mastercard, Discover, or American Express payment cards. Even better, many retailers let you charge an extra price to your in-store purchase and give you back that extra amount as cash back.

Rewards

Some debit cards offer rewards in the form of points or cash back. Debit card rewards are usually lower in quantity than credit cards, but most debit cards come with relatively modest fees.

Are There Drawbacks with Debit Cards?

Debit cards are useful tools, but they aren’t perfect.

Fees

While most debit cards avoid annual fees, some reward and high interest (think APY, not APR) debit cards charge a monthly plan fee for the best rewards. Beyond program fees, debit cards might feature charges for a whole lot of things you might have never considered, including:

  • Cash reload (in-store with select brands)
  • ATM balance inquiries
  • Out-of-network ATM surcharges
  • Overdraft fees
  • Foreign transaction fees
  • Card replacement or expedited delivery

Limited Fraud Protection

Credit cards provide greater purchase protection than debit cards. Credit cards offer robust Zero Fraud Liability protection, including chargebacks, something debit cards lack.

A chargeback is a form of refund where the card issuer refunds the purchase price to a cardholder at the cardholder’s request. Unlike a merchant-initiated refund, chargebacks allow credit cardholders to regain their money from an unscrupulous or dishonest merchant. Despite this, most debit cards protect unauthorized purchases for up to 60 days after a transaction – provided you notify the bank or credit union.

What to Look for in a Debit Card

Aside from the registered trademarks of your issuing bank and card brand printed on the front, there are a handful of major things to look out for when you get a debit card.

The Most Important Things to Look for with Debit Cards:
Fees Are there monthly fees associated with the account? Are there fees for ATM withdrawals, foreign transactions, etc.?
Rewards Does the card offers a rewards program such as cash back, cryptocurrency, or other types of perks?
Payment network What payment network does the card use? Mastercard and Visa enjoy wider acceptance than Amex, for example.
Add. features Does the card offer ID theft protection, Zero Fraud Liability, or special discounts with select merchants?
Account management Debit cards, unlike credit cards, are tied directly to your bank account balance. Because of that, you should find a program or application that can help you easily keep track your current balance at all times. Many banks have their own free mobile banking apps available to download that serve this function, as do separate third-party companies.
ATM access Even nowadays, the motto “cash rules everything around me” can still apply, such as when leaving a tip at a restaurant or haggling at an outdoor craft market. Always know what your daily ATM withdrawal limit is and any fees charged for taking your cash out to avoid ending up in an embarrassing situation at the register.
Credit building Some debit cards now offer the ability to build credit with purchases. These debit cards act like secured credit cards, with the spending limit tied to the balance in your checking account.

Other items to look for with debit cards include:

  • Intuitive online account management and mobile apps: Debit cards are tied directly to your bank account balance, unlike credit cards. Because of that, you should find a program or application that can help you easily track your current balance at all times. Many banks have their own free mobile banking apps available to download that serve this function, as do separate third-party companies.
  • Daily ATM withdrawal limits: Even nowadays, the motto “cash rules everything around me” can still apply, such as when leaving a tip at a restaurant or haggling at an outdoor craft market. Always know what your daily ATM withdrawal limit is and any fees charged for taking your cash out to avoid ending up in an embarrassing situation at the register.
  • Credit-building: Some debit cards now offer the ability to build credit with purchases. These debit cards act like secured credit cards, with the spending limit tied to the balance in your checking account.

Tips for Using a Debit Card Responsibly

While debit cards offer convenience and security, using them responsibly is important. Here are a few tips to help you make the most of your debit card:

  • Keep track of your transactions: Regularly review your bank statements or use online banking to monitor debit card transactions. This will help you identify any unauthorized charges or errors.
  • Set up alerts: Many banks provide the option to set up alerts for debit card transactions. You can receive notifications via email or text message whenever a transaction is made, helping you stay informed about your account activity.
  • Protect your PIN: Never share your PIN with anyone, and avoid using obvious numbers (such as your birthdate) that can be easily guessed. Memorize your PIN instead of writing it down and cover the keypad when entering your PIN at ATMs or point-of-sale terminals.
  • Be cautious with online transactions: When making online purchases, ensure that you are on a secure website that encrypts your payment information. Look for the padlock symbol in the browser address bar to confirm the website’s security.

Conclusion

Debit cards are a convenient payment method that provides safety and protection against fraud. While most debit cards don’t earn the rewards of a credit card, some do earn similar rewards, often without the annual fee or interest charges. Other debit cards might provide credit-building tools, such as access to Experian Boost or reporting purchases to credit bureaus as on-time payments.

Despite the benefits, there are things to consider before getting a debit card. Carefully examine the fees with the card, including any additional plans required to gain access to premium tools like credit-building, rewards, or investment portfolios.

Ultimately, each debit card offer is unique, meaning you should carefully compare all interesting offers to find the card that’s right for you.

Related Article: The Best Debit & Prepaid Cards

Types of Credit Cards: Cash Back Credit Cards

by Cory Santos
types of credit cards cash back credit cards

Last updated on March 22nd, 2023

Cash back credit cards are among the most popular rewards cards as they offer cash back on purchases you make in a variety of categories. Through the use of four-digit merchant category codes assigned to businesses, card issuers can track and categorize the purchases you make to grant you the proper bonuses. Cash back rates do vary from card to card, and even from quarter to quarter using the same card, so finding the one that best matches your spending habits is key.

Cash Back Credit Cards at a Glance

While there are different types of cash rewards credit cards, they all grant you a bonus after you spend on a purchase. The rewards rate for a cash back credit card can start as low as 1% and generally go up to around 5% or so depending on the card issuer, who may also grant you other perks and introductory bonus offers. If you spend 500 on purchases within three months of opening select cash back credit cards, for example, you may earn a 150 bonus statement credit. Often times, the combination of the tax-free cash back that you’ll earn with the card along with its other benefits will earn you more than patiently waiting for the lower APR yield on your savings account to accumulate, too.

Credit Required

Different credit scores qualify you for different levels of cash back credit cards, but generally, you want to have “good” credit or better if you want the best rewards. Having a better credit score also gives you a better chance to qualify for a credit card with a lower standard APR, which is important to note if you tend to carry a balance from month-to-month.

Fees

Don’t let the potentially high rewards rate that cash back credit cards offer distract you from the fees that you may be charged for using and simply owning the card. Annual fees of up to $100 aren’t unheard of when it comes to cash back credit cards, but don’t let that charge scare you away. In fact, cash back credit cards with high annual fees tend to offer better rewards bonuses. So long as the rewards you earn annually outweigh the annual fee, you’re ahead of the game.

Some cash back credit cards may charge you a late payment fee if you don’t pay back the balance owed between statements, and others tack on foreign transaction fees for international purchases. Read the card’s terms and conditions and other advertiser disclosures before making your decision to avoid being surprised by these or any other charges.

What to Look for in a Cash Back Credit Card

Cash back credit cards are regularly compared to one another based on their rewards structure, categories, and other factors. Take the features below into account when shopping around for a new card.

Another thing to consider is the accumulated charges you may incur.  All of the money that you could potentially earn back with even the best cash back credit card in your wallet would be meaningless if you’re stuck paying fees for using the card- and not necessarily irresponsibly either! Look out for high foreign transaction fees and balance transfer fees, as well as late payment fees if you already occasionally find yourself short at the end of statement periods.

The Most Important Things to Look for:
Rewards categories Just as you wouldn’t wear clothing in a size that’s not your own, you want to find the cash back rewards categories that fit you best. If you have an extended commute around the city that includes going to work, running errands, and picking the kids up from practice, a card that grants cash back on gas will likely earn you lots of cash back.
Redemption options Statement credits are a popular option, as are gift cards to big chain retailers and supermarkets, or a direct deposit into your bank account. Some cards give you the option of having a physical check mailed back to you if you want a paper trail of your rewards payouts, whereas others may give you the option to pay the funds forward to the charity of your choice.
APR The introductory interest rates offered by some cards are often a big selling point to new applicants. Once that period is over, though, the card’s regular APR may be too high to handle if you regularly carry over balances between billing cycles. You can offset this by paying off your balance in full each month or signing up for a credit card that has an APR that your budget can afford.
Annual fee It’s fairly common to find a cash back credit card that doesn’t charge an annual fee, but it may be tougher to find one with benefits as good as one that does. If you don’t want to pay too high of an annual fee or miss out on benefits that serve you best, the trick is to find a card with perks that outweigh the cost. Always check the annual fee and don’t get saddled with a card that won’t offer you enough value.

Which Type of Cash Back Credit Card is Best?

When it comes to cash back credit cards, the important question to ask is not which one is best overall, but which one is best for your specific situation. The easiest way of deciding this is determining which cash back rewards structure you’d like to work with- flat, rotating, or tiered.

Flat rewards are the easiest to manage as they offer a set amount (also known as a flat amount) for all purchases you make on your card. It’s common to see cards with a flat reward return rate of 1% to 2%. While that may not sound impressive, the tradeoff comes in how easy it is to determine how much you’ll get back from your buys.

Rotating rewards feature different bonus categories each quarter that you have to sign up for in order for your purchases to qualify. They generally yield a higher return than flat rewards card, but you have to plan your purchases in advance in order to maximize your cash back earning potential. While one quarter may see you earning 3% cash back on travel expenses, that category may be gone in the following three months in favor of rebates on gas or warehouse club purchases.

Tiered rewards offer a comparably high return on purchases in a select category, but only up to a specific amount. After that, it’s common to see the cashback rate drop a low as 1%. A startup with a cash back credit card that rewards 5% on office supplies up to $2,000 a year may meet that limit in a single billing cycle, both limiting how much they can earn going forward but also getting a big cash back bonus upfront that can be used for other supplies.

You may not have the necessary credit to qualify for an unsecured credit card quite just yet, which is where secured credit cards come in. While the APR and benefits offered by some unsecured cards are often more appealing, they may also be far stricter when it comes to their application process in terms of evaluating personal income, assets, and other factors. In time, you’ll get there too.

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Cash Back Credit Cards

Types of Credit Cards: Secured Credit Cards

by Cory Santos
types of credit cards secured credit cards

Last updated on March 22nd, 2023

Whether building your credit from scratch or rebuilding it after a few financially tough years, secured credit cards can improve your credit score and increase your credit limit in the future with responsible use. Unlike an unsecured card, a secured card requires a deposit to establish a line of credit.

Secured Credit Cards at a Glance

Secured credit cards are real credit cards that can be used to rebuild your credit if your FICO credit score isn’t as high as you want it to be and keeping you from making the purchases you want. A card issuer usually requires a deposit of 200 dollars or more to get started, and that refundable security deposit serves as the limit that you can spend using the card. Unlike prepaid cards, secured credit cards send credit reports to the three major bureaus as you build a credit history. Over time, an established pattern of responsible financial behavior using a secured credit card can help you qualify for an unsecured credit card the next time that you apply.

Credit Required

You don’t have to have a “good” credit score in order to successfully qualify for a secured credit card. In fact, you’re likely to be approved when you apply for most secured credit cards even if you have “bad” credit or “no credit” at all. This is due to the fact that these types of credit cards are a low financial risk for card issuers as you’ve already provided a deposit in order to open the bank account in the first place.

Fees

Credit building is your main priority with a secured credit card, not paying fees when you’re already in a difficult financial situation. Luckily, there are many well-reviewed secured credit cards that you can apply for that have low annual fees (typically under 50 US dollars) or no annual fees at all. You may come across some cards that impose “account fees” or other charges, so as you should with every single credit card you apply for, be sure to read the terms and conditions thoroughly before making your decision.

What to Look for in a Secured Credit Card

Many secured credit cards offer comparable benefits and perks. When searching for a new card, be sure to look out for one with these favorable features.

The Most Important Things to Look for:
Security deposit Secured credit cards require a deposit to open. This deposit acts as the collateral for the loan (it “secures” the loan, hence “secured card”) and the credit limit. If you deposit $200, your credit limit will be $200, for example. Most secured cards require a deposit of around $200 to open, but some, like Self, only require $100.
Annual fee Having to pay an annual fee for a secured credit card doesn’t automatically make it unfavorable, though there are many available that waive said charge. If you find a credit card with the limit, APR, and perks that you prefer, paying an annual fee isn’t a bad thing if the benefits are greater than the cost. Depending on your creditworthiness, you may be able to find a secured credit card that balances both of these aspects perfectly.
Application eligibility The best credit card applications use language that is clear and easy to understand. Select card applications may charge a processing fee, for example, that other similar cards don’t.

This threshold is removed completely when applying for certain secured credit cards, as the deposit you’ll be making covers the risk that the issuer is taking on. While not the case for all secured credit cards, there are some available to you even with a really bad credit rating.
Other Things to Look For:
Upgrade If you use your secured credit card responsibly and pay off your balance each month, in a few years or sooner, you may qualify for an unsecured credit card. These financial products do not require a deposit on your part, and generally offer a better APR and much more enticing benefits, such as a higher return on travel rewards points and cash back on dining and entertainment purchases. Some issuers may automatically switch you over to an unsecured credit card after you’ve established your credit and improved your score. Often you will have to apply for these cards on your own, though you’ll be in a better position to qualify for the unsecured card that you want with your improved credit score in hand.
Credit tools The time that you’ll be spending establishing or building up your credit with the responsible use of a secured credit card is not the time that you should be forgetting to make even a single account payment. Doing so may hurt your credit score and increase the time that it will take you to eventually qualify for an unsecured credit card. Nearly all credit card issuers and financial institutions offer nowadays offer online banking features to help account holders keep track of their expenses 24/7. There are also mobile apps that can be installed on your smartphone and other online electronic devices from these institutions that will alert you if you are approaching your limit or have a payment due soon, making the process of building your credit more convenient than ever before.
Rewards It’s not unheard of to come across secured credit cards that offer cash back rewards, though they are more difficult to find than their unsecured counterparts. Finding one with these benefits can serve as another incentive to use the card responsibly, aside from showing your creditworthiness to the three credit bureaus.

Why Use a Secured Credit Card vs an Unsecured Credit Card or Prepaid Card?

Secured credit cards are great financial tools to turn your financial standing around if you have poor credit or no credit, as using them responsibly can improve your credit score through reporting to the three major credit bureaus in the United States. Prepaid cards, on the other hand, do not report your activity to the three bureaus, so using them won’t boost your credit score.

You may not have the necessary credit to qualify for an unsecured credit card quite just yet, which is where secured credit cards come in. While the APR and benefits offered by some unsecured cards are often more appealing, they may also be far stricter when it comes to their application process in terms of evaluating personal income, assets, and other factors. In time, you’ll get there too.

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Types of Credit Cards: Student Credit Cards

by Cory Santos
types of credit cards student credit cards

Last updated on September 20th, 2023

If the coins you’re finding in the cushions of your dorm couch can’t cover the increasing cost of everything on campus, it may be time to look into student credit cards. Student cards can be useful tools to help you pay for expenses while you’re far from home and are a great way to begin building your credit score in preparation for the big purchases in your future. Learn the basics of this popular credit card type to maximize your rewards all semester long!

Student Credit Cards at a Glance

Student credit cards are financial tools that are marketed to students. Some student credit cards may include a rewards program that gives you cash back for purchases made at gas stations, grocery stores, and restaurants, while others offer modest cash back rewards or points for all purchases made, or none at all. Many student credit cards do offer debt forgiveness programs if you forget to pay on time, as well as credits on your statement if you do well in school, such as when your GPA is 3.0 or higher, for example. If you’re able to establish responsible financial habits now while using student credit cards (including paying your monthly statements off on time), it’s likely that you’ll be approved for a rewards card with a better interest rate and benefits the next time you apply.

Credit Required

Student credit cards often feature higher annual percentage rates and lower initial credit limits, as students commonly have a limited credit history and are considered by banks to be risky. The APRs for these cards tend to start in the upper teens and can reach as high as the upper twenties range. The credit needed to be approved for a student credit card varies as well but generally ranges from “good” to “poor” while select cards require no credit rating at all.

Fees

More often than not, student credit cards do not charge an annual fee. That said, from the time you activate your credit card, you’ll want to pay off your purchases automatically in order to avoid paying high-interest rates and eventually going into default. Not paying your monthly statement can cause your loan to be considered delinquent, and defaulting can cause serious damage to your credit history that will show up on credit reports for years to come. Just because you have a credit card in your wallet doesn’t mean that you now have the power to buy everything and treating the tool as such will likely result in quickly accumulating fees.

What to Look for in a Student Credit Card

Not all student credit cards make the grade. Look out for these popular benefits and features listed below when shopping around for a new card.

The Most Important Things to Look for:
Academic incentives A perk unique to student credit cards, some products offer cardholders account statement credits if their grades meet a certain threshold. That means that with the right credit card in your wallet, you may be entitled to a credit on your balance simply for keeping your grade point average above 3.0, for example.
Rewards Many student credit cards feature relatively minimal benefits when compared to general rewards credit cards, but that’s not always the case. Shopping around will show you that there are indeed credit cards with rewards programs that match all the cash you spend dollar for dollar, as well as some with a generous earning rate of 3 or even 5 points per dollar spent.
Financial tools It’s important to select a student credit card that grants you the ability to conveniently check your balance online at any time, as you can spot potential fraudulent charges before others are made on your account. 24/7 tracking is also useful when budgeting yourself to ensure that you are able to pay off your balances each month and keep your credit score as spotless as possible.
Other Things to Look For:
Debt forgiveness When learning how to use credit cards and navigate debt, especially at a young age, it’s important to look for a card that offers debt forgiveness. If you’re striving to be financially independent and free of your family’s safety net, you will want a card with debt forgiveness to prevent your credit score from being negatively affected. Between school, work, and your social life, you may forget or be unable to pay the minimum amount due on your card each month (if you’re not paying the balance off completely). Spending within your means can help in this regard, but just in case, it’s comforting to know that you have at least one opportunity to keep your slate clean with debt forgiveness.
Fraud protection Credit card fraud can occur anywhere at any time and to anyone, whether making a purchase on campus at a vending machine or paying for parking when you head downtown. If you shop online with your credit card using your smartphone, a site that has been hacked can also prove to be a problem for your identity and account. Making purchases with a student credit card that offers fraud protection keeps you free of the financial burden you’ll otherwise be responsible for if your card gets lost or stolen. This is an integral feature that you should look into when signing up for student credit cards and any credit card in general.

When to Sign Up for a Student Credit Card, and When to Choose a Different Course

If you’re in school and have a source of income, but do not have an extensive credit history, student credit cards might be your best option. Not only are you more likely to qualify for a student credit card if you fall under these categories, but you’ll also be able to get the ball rolling on building up your credit score. Proving your creditworthiness through responsible use of a student credit card makes it easier to qualify for big-ticket purchases, such as when shopping for a vehicle or real estate down the line.

You should look out for student credit cards that grant cash back or points for purchases in categories you’re already accustomed to spending in, such as when you shop in bulk at your local wholesale club, as well as those with debt forgiveness and no annual fee. Making it out on your own isn’t easy at first, but with the right student credit card in hand, you’ll graduate to bigger and better cards in no time.

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Types of Credit Cards: Travel Credit Cards

by Cory Santos
types of credit cards travel credit cards

Last updated on March 22nd, 2023

Travel cards are consistently among the most popular types of credit cards, and for good reason: In addition to their purchasing power, they offer a multitude of perks. Plus, consumers are as eager to travel now as they’ve ever been, and with so many opportunities to spend – be it booking travel, purchasing experiences, or buying souvenirs – credit cards are a convenient commodity. If you’ve yet to navigate the sea of travel cards, you should first familiarize yourself with them. Read on to learn the core components of travel credit cards, what they mean, and what to look for when comparing them.

Travel Credit Cards at a Glance

As you might expect, travel credit cards are aimed primarily at individuals who spend ample time on planes, in hotel rooms, and generally out of town – whether on business or vacation. There are general travel credit cards, which are great all-around options that will give you some form of benefit with hotels, airlines, rental companies, and booking agencies; and there are also co-branded travel cards such as hotel and airline credit cards. These are partnered with individual hotel brands or airline companies and their perks are more specific to the associated carrier or lodging company. Co-branded cards will give you better value if you’re a loyal customer of a particular brand but are less practical if you like to keep your options varied or prefer to look for the best possible deal among the competition.

Credit Required

Travel cards will usually require applicants to have at least a good credit standing, with a credit score of around 700 being a safe starting point. Issuers offer plenty with a travel card, therefore they’ll be wanting customers who are financially responsible for handling all the goodies that their plastic includes. As with other types of credit cards, travel cards can have different “tiers”, with the most prestigious being offered to a select few. You should try to have good credit regardless of which type of card you’re in the market for, but it’s especially preferred if you’re looking for a good travel card.

Fees

Since all the add-ons in travel cards lean in the customer’s favor, issuers need a counterbalance to make up for all the value they make available. That’s where annual fees come in. Many credit cards have annual fees, but they are especially commonplace in travel cards. Depending on the exclusivity of the card, annual fees can range from double digits to over $500 – just for being a cardmember.

It’s not all doom and gloom, however, as in many cases, the annual fee is offset after taking advantage of just one or two of a travel card’s benefits. For instance, a card might impose a $95 annual fee but also offer a $100 statement credit for any travel incidentals you purchase in a given year (baggage check costs, room service, etc.). Maxing out that $100 statement credit makes up for the $95 you’d have to shell out for being a cardmember. Plus, several travel cards waive the annual fee for the first year, further incentivizing you to apply and spring for all the perks.

What to Look for in a Travel Credit Card

The majority of travel cards feature a similar set of cardmember bonuses and perks. Below are the most common to look out for when considering a travel credit card.

The Most Important Things to Look for:
Rewards They do not just travel credit cards, they’re travel rewards credit cards. Arguably the main reason customers own one, rewards programs can make it easy to accumulate points or miles that can later be redeemed in multiple categories.

The points structure will typically be set up to earn you at least 1 point per $1 spent on most purchases and double or triple that amount per $1 on specific categories such as dining out at restaurants, purchasing flight reservations, or booking hotel stays – purchases that travel enthusiasts tend to make more frequently than the rest of consumers.
Perks You’re more likely to see travel credit perks in the premium tiers of travel cards. These may come as reimbursements when you have expenses such as checking luggage, purchasing an in-flight meal, paying for transportation, or ordering room service.

Another type of travel credit is reimbursement for enrolling in expedited airport security programs like Global Entry. frequent travelers will surely be familiar with the woes of late or canceled flights, lost luggage, or rental car accidents.

A travel card will cover most of these unwanted occurrences, providing the customer with insurance up to a set amount for when disaster strikes.
Welcome bonus The flashiest selling point of travel cards is the sign-up bonus. Almost all travel cards have one, and it’s the “carrot” with which issuers draw consumers to apply. A sign-up bonus will typically be a huge amount of rewards points or miles that is awarded to you after reaching a spending threshold within the first few months after opening an account.

It’s important that you don’t go out of your way and find things to spend money on just so you can hit the goal that will net you the sign-up bonus, otherwise you’ll be finding yourself deep in debt that you may not be able to easily repay.
Annual fee It’s not impossible to find a travel rewards credit card that doesn’t charge an annual fee, but it may be tougher to find one with benefits as good as one that does. If you don’t want to pay too high of an annual fee or miss out on benefits that serve you best, the trick is to find a card with perks that outweigh the cost.

Always check the annual fee and don’t get saddled with a card that offers no value – the very best travel cards feature the highest annual fees but the perks involved often surpass that yearly charge.
Other Things to Look For:
Redemption options Travel cards will normally give you multiple options when you want to redeem your accumulated points. Free travel – in the form of booking flights, hotel stays, rentals, and vacation packages – is one of the most popular choices, as are statement credits. You can also redeem your points for gift cards, and if the card issuer is partnered with other loyalty programs – such as an airline or hotel loyalty program – you may be able to transfer miles or points to an existing account where you might already be accumulating some.
Travel credits You’re more likely to see travel credit perks in the above-average tiers of travel cards. These may come as reimbursements when you have expenses such as checking luggage, purchasing an in-flight meal, paying for transportation, or ordering room service. Another type of travel credit is reimbursement for enrolling in expedited airport security programs like Global Entry.
Travel insurance Expect the unexpected, as the saying goes. Frequent travelers will surely be familiar with the woes of late or canceled flights, lost luggage, or rental car accidents. A travel card will cover most of these unwanted occurrences, providing the customer with insurance up to a set amount for when disaster strikes. Though not the most glamorous of perks, they allow you to enjoy your journey with peace of mind.
Lounge access Depending on the card, you may have exclusive access to a portfolio of hotels where you can enjoy special rates or other amenities. In addition, certain cards grant entry into swanky airport lounges where you can relax and enjoy a drink or get some tasks done with complimentary workstations and Internet access.

 

Pros and Cons of Travel Credit Cards

If you use them wisely, travel credit cards can be one of your best friends. The more frequently you use one, the more juice you get out of it, especially thanks to the ability to earn rewards points. Earning additional points on the categories that travelers spend more money in – dining and travel-related expenses – makes sense, and the ability to earn at least one point per dollar on most other purchases is a great incentive to keep a travel card handy as a daily form of payment. These cards are also very flexible with the options you have when you want to redeem your points, and they’re accessible in that they’re accepted worldwide and in most cases, you won’t be charged for using them abroad.

There are drawbacks, however. If you’re just a casual spender, then you’ll be working for a travel card rather than making it work for you. Since most benefits are maximized when traveling – and the expenses that come with it – you simply won’t get a good value if you only use your card for a weekend trip or the one time of the year when you get on a plane. What’s more, since travel credit cards tend to have above-average interest rates, you’ll be paying more in the long run if you’re not careful with your spending.

Ultimately, a travel rewards card caters to a particular lifestyle, and those who live it will benefit most from one. It’s easy to get wooed by all the introductory offers that card issuers dangle at you, but if you don’t have the financial footing to afford a travel card, or if you simply don’t spend much time jet setting, you’ll be better off with a credit card that’s less demanding. It’s always a wise move to evaluate where you stand before applying for a credit card, even if you’re the perfect fit for it. When you know you can get all the value out of your next credit card, especially a travel card, you’ll be in for smooth sailing ahead. Bon voyage!

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How to Easily Remove Debt Collections from Your Credit Report

by Allan Guzman Chinchilla
how to remove debt collections from your credit report

Last updated on April 20th, 2023

Unpaid collections can remain on your credit report for years and cause incredible damage to your FICO score, but not irreparable damage. In time and with the right tactics, there are ways to have these records removed from your credit report and turn your bad credit around. How, you ask?

Relentlessly Research and Verify

Knowledge is power in any situation you find yourself in, particularly when it comes to your personal finances. As such, a good first step if you want to remove debt collections from your credit report is to get all of your facts straight. In order to contest anything that a debt collector has added to your credit report, you should do a deep dive in your own records for info, such as:

  • Account numbers
  • Account statuses
  • Account balances and payment history
  • Dates that debts went delinquent

What you’re looking for if you want to remove the collection from your records is an inaccuracy or anomaly. Aside from familiarizing yourself with your own credit history, with that knowledge, you’ll have the information to back you up when you take your next action.

Dispute Errors on your Credit Report

Now that you’ve done your homework and checked what you believed to be accurate information on your credit report, it’s up to the credit bureaus and collections to validate the debt. When your account is sold to another collection agency, for example, that’s a great time to dispute errors as the burden of proof will be on them to validate your old data.

If you find an auto loan or outstanding medical bill on your report that is incorrect in any way, for example, you can also request that the collector validates the debt. Don’t forget that you have 30 days from when a collector first reached out to you about a debt to question its validity.

Speaking of time, a delinquent account on your credit report should fall off your credit profile seven years after they were deemed to be so. If you find collection accounts on your report that go further back than seven years, you can file a dispute with a credit bureau to have it nixed.

Request a Goodwill Deletion

A more direct approach to take if you want to easily remove debt collections from your credit report is actually to just ask collection agencies to get rid of them. This process is known as a goodwill deletion and works best with a good credit score and equally impressive letter template.

Mention a few extenuating circumstances that you went through, and out of the goodness of their heart, a collector may remove it from your report. For peace of mind, send the letter to collectors as certified mail. That way, you’ll definitely know it’s been received when you follow up after. Requesting a goodwill deletion is also a better idea than any “pay for delete” scenario you may be considering, as that would involve creditors just not reporting your account in exchange for the debt amount. You don’t want to go down that path.

All We Need is Just a Little Patience

We fall so that we can learn to pick ourselves back up. That goes for your credit rating as well, though, with these tips, you may have an easier time getting back on your feet.

Related Article: Here Is What Happens If You Don’t Pay Your Credit Card Bill

Types of Credit Cards: Business Credit Cards

by Cory Santos
Types-of-credit-cards-business-credit-cards

Last updated on April 5th, 2023

Credit cards aren’t just for casual consumers. For business owners, both entrepreneurial and established, it isn’t always easy to secure funds via investors, loans, or even company profits to cover the cost of everyday expenses or the occasional large purchase. Having a business credit card in place offers convenience, a steady source of buying power, and the added benefit of being rewarded your shopping – much as a personal credit card does. But similar as both types of payment cards may be, there are some key differences that clearly separate the two. Read on to learn the basics of business cards and what to look for when comparing them.

Business Credit Cards at a Glance

A business credit card is essentially a sibling of the personal credit card, and it’s composed of roughly the same features: a line of revolving credit, an annualized interest rate on unpaid balances, and – depending on the type of card – a set structure that gives you something back for your card usage (points, miles, cash back, etc.).

As the name implies, though, business credit cards are meant to be used by business owners – or their employees – to cover business expenses. A business card also affects the credit history of a business, which differs from personal credit history. As such, it’s important to keep business and personal expenses on different cards; mixing them makes it difficult for account keeping, and if you become unable to pay off a balance, you’ll business will suffer for it.

Just because business credit cards are meant for business expenses doesn’t mean you’re restricted to just one spending category, though. Since there are multiple industries, and every company within them has different needs, there is no single purchase category that qualifies as “business”. Likewise, just because it’s a business card, it doesn’t mean you can’t get something back for covering company costs. Issuers offer credit cards that reward users with cash back, travel points, airline miles, and more. There are co-branded business cards that are partnered with retail merchants, hotel chains, and frequent flyer programs. So if your business requires constant travel, you’ll benefit from a business card that rewards you for using it towards flight reservations. If you regularly need to purchase office supplies, a cash back business card will return you a percentage on items you need to buy anyway.

Business credit cards, then, can be versatile. If you use one correctly, it can greatly propel your enterprise forward while also netting your covetable perks as a bonus.

Credit Required

Just like personal credit cards, business credit cards vary on the credit required for approval. For startups and small side businesses, a secured business card is an option. For companies with a robust credit history and a solid foundation, there are premium business cards that they may qualify for.

Applying for a business credit card is similar to the application process for a personal card, but you’ll have to provide some additional information. Naturally, you’ll need to supply details about your business – issuers need a clear picture of applicants and the level of risk they assume when providing a line of credit – but you’ll also need to supply a personal guarantee. A personal guarantee is a pledge that holds you personally responsible for your business’s debt in the event that the business fails. It will also be useful, though not necessarily required, to have a strong personal credit history when applying for a business credit card.

Fees

There are business cards with annual fees, and there are cards without them. Cards with fees will usually offer more benefits, though business cards sans annual fees are not entirely devoid of perks. Regarding foreign transaction fees, they are common in general-use business cards, but you likely won’t see them enforced on travel or co-branded airline and hotel business credit cards.

What to Look for in a Business Credit Card

The type of business card you apply for will depend on your and your business’s needs. Look for the common benefits below when researching your ideal first (or next) business credit card:

The Most Important Things to Look for:
Welcome bonus Many cards today court applicants with a sizable signup bonus in the form of rewards points or frequent flyer miles. The sums vary; you may see offers of 5,000 bonus points after making an initial purchase, or you might come across a bonus of 125,000 hotel points after spending $3,000 within the first three months as a cardholder. Travel business cards, in particular, can be very generous with their bonuses. In fact, you don’t need to own a business that requires constant travel to apply for a travel business card. As long as you reserve it for company expenses, you can cash in your bonus on a well-deserved vacation.
Rewards program As mentioned, travel business cards will almost always involve a rewards or loyalty program that earns you points or miles with your purchases. For general travel cards, purchases in select categories – like flights or restaurants – accumulate points at a multiplied rate. Hotel and airline co-branded cards will also give you additional points on certain categories, as well as when you make purchases directly with the brand.

Cashback is the other major rewards setup found in business cards. Like travel cards, select categories – think office supply stores and telecommunications services – can earn you cash back at an accelerated rate. Some cash back cards eschew the category multipliers and instead offer 1.5% or even 2% back on every purchase. When you’re ready to redeem your accrued rewards, you can do so for statement credits, travel booking, hotel nightly stays, or gift cards.
Other Things to Look For:
Free employee cards Business credit cards offer an efficient way to keep track of company spending, and if you have employees who regularly make company expenses, look for a credit card that allows you to issue additional cards for your staff. Additional cards issued at no extra cost is a popular perk, so you’ll find it in multiple offers.
Business tools Issuers can make it easy to keep track of your money’s movements thanks to resources like the integration between your account statement and accounting software, custom expense reports, and irregular activity alerts.
Intro APR You may have plenty of use for your card, be it for multiple small purchases or one big-ticket expense, so paying off a balance over time with no interest charges to worry about is a welcome incentive.

Business Credit Card Pros and Cons

Provided you have an acceptable financial history, a business credit card can grant you easy access to funds for covering regular business expenditures, especially if you find yourself in an emergency. Business credit cards tend to have higher credit limits than personal credit cards, since it’s likely you’ll be making more frequent, and more expensive, purchases for your company. Your business credit history will also benefit with responsible card use, so you’re not limited to bank loans or trade credit lines from suppliers to raise your score. And if you issue extra cards for your employees, their (ideally) sensible purchasing practices will only profit your borrowing reputation. Speaking of bank loans, you’ll have an easier time getting approved for a business credit card than a traditional loan, and proving you’re trustworthy with the former will increase your approval chances for the latter.

Business credit cards are not a perfect resource, and there are numerous factors to keep in mind when applying for one. They’re not disadvantages, per se; think of them instead as caveats you must be mindful of. Firstly, interest rates are not the lowest on business cards, so you’ll want to prioritize paying off your balance in full if you wish to avoid painful interest charges. You will also need to stay on top of employee spending; don’t request additional cards if A) You can’t afford it and B) You can’t trust your subordinates to be responsible with your buying power.

Business credit cards are exempt from consumer protections under the federal Credit Card Accountability Responsibility and Disclosure Act, so issuers are not required to give advance notice if they raise your interest rates. In addition, they may impose higher late fees than what is allowed for personal cards. Lastly, the personal guarantee you make when applying for a business card can come back to bite you hard if you become personally responsible for any debt your business incurs. Such a burden can impact both your business and personal credit history, and no one wants to be hit with that double whammy.

Business credit cards, then, can be a great resource for companies of varying sizes – provided you can use one wisely and are aware of the potential pitfalls. Always read through a card’s terms and conditions to be fully informed on aspects that may impact you positively and negatively. You’ll have your business’s financial reputation to care for as well as your own, so it’s worth spending plenty of time comparing your options until you find the card that’s right for you.

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Types of Credit Cards: Airline Credit Cards

by Cory Santos
Types-of-credit-cards-airline-credit-cards

Last updated on March 22nd, 2023

When browsing travel credit cards, you can go broad or you can go narrow. A general travel credit card is a great tool to earn points and redeem rewards across the landscape of airlines, hotels, and other travel merchants. A more niche option, however, is a specific type of travel card, such as an airline credit card. If you’re a loyal customer of a particular carrier, having its co-branded card in your pocket can give you a huge boost in value by providing you with perks for you already do: Fly with that airline. Read on to learn what makes up an airline credit card and get a better understanding of whether it’s the right credit card for you.

Airline Credit Cards at a Glance

An airline credit card is co-branded between a financial institution and a passenger airline. It has all the features of a traditional credit card, as well as bonuses that exclusively benefit customers of that airline. Most airline cards are designed to be used worldwide and will reward you with miles (the equivalent of points) for the purchases you make. These miles can then be redeemed for a variety of incentives, such as free flights.

Credit Required

Travel cards, in general, tend to require at least a good credit standing of applicants, and airline cards are no exception. Also in line with general travel cards, airline cards have above-average interest rates. You’ll commonly see APRs ranging from the upper teens to the mid-and upper-twenties.

Fees

Since airline cards bring plenty of perks with them, expect to see the majority of them charge an annual fee to counterbalance all the enticements. The amount of the fee depends on the card’s “tier”; the more accessible cards will typically have annual fees of around $50 to $95, while the most luxurious options will climb upwards of $400 in annual fees. Some airline cards do not carry an annual fee, but those will offer a basic set of benefits. The sting of these charges can be offset if you maximize all the resources extended to you, however. For instance, if an airline card imposes a $95 annual fee but also offers you a $100 statement credit, the latter essentially pays for the former.

Fortunately, there is one pesky fee you generally won’t have to worry about, and that’s a foreign transaction fee. With their cosmopolitan nature, airline cards are best used in as many places as possible around the world, thus it would work against their favor to charge the cardholder with a fee for shopping abroad.

What to Look for in an Airline Credit Card

Regardless of issuer or carrier, airline cards usually come with a similar set of features. Keep an eye out for these when shopping around for your next piece of plastic.

The Most Important Things to Look for:
Welcome bonus Part of the reason why airline cards, and travel credit cards overall, are so popular is that they draw customers in with the promise of a massive bonus reward. When they open an account and meet a certain spending threshold – typically between $1,000 and $4,000 – cardmembers will be given a jackpot of anywhere from 10,000 to 100,000 bonus miles, depending on the card. The higher the spending requirement, the higher the reward. Not only would such quantities take a while to accrue through conventional spending, but those sums alone could be worth one round trip flight to thousands of destinations.

While the prospect of several thousand miles in your account is extremely appealing, you should approach the challenge wisely. The best time to apply for an airline card with a signup bonus is when you know you’ll have some hefty spending to do, otherwise, you’ll be scrambling to make potentially unnecessary purchases just to hit that bonus goal. In addition, if you find yourself 50,000 miles richer but $3,000 in debt and no means to pay it all off, you’ll have dug yourself into a nasty hole. Thus, while the signup bonus can, and should, work for you, it can also work against you.
Rewards program The aforementioned signup bonus delivers miles as part of a frequent flyer rewards program in airline cards. The basic structure of these rewards programs allows you to earn miles for purchases made with the card. Most cards will earn you 1 mile per $1 spent, while shopping in certain categories will net you multiplied amounts, such as booking directly with the card’s airline or making purchases in dining or travel categories. As you can guess, the optimal strategy is to use your airline card early and often in the categories that will produce the highest quantity of miles.

Airline cards allow you to redeem accumulated miles in several ways. Naturally, top of the list would be discounted or free airfares. Even if you can only pay for part of your flight with your earned miles, you will still be saving money. You can also use your miles for seat upgrades to get more legroom or even move up to business or first class. Other ways to redeem include vacation planning, car rentals, hotel bookings, gift cards, and donations.
Other Things to Look For:
Priority boarding Few things are more stressful than dealing with the coveted overhead bin spaces. Luckily, most airline cards feature priority boarding so you can board the plane before the masses and secure a spot for your carry-on.
Lounge access The more prestigious airline credit cards offer either discounted access or full memberships to exclusive airport lounges where you can wait for your flight or get some work done and enjoy a range of complimentary amenities.
Checked bags If you do a lot of flying you’ll welcome this perk, which grants you – and, depending on the card, companions traveling on your reservation – your first bag checked free. Higher-end cards will also waive the charge on your second checked bag.
Miles transfers Almost all the major airlines belong to one of three alliances: SkyTeam, Oneworld, and Star Alliance. Although you may have a credit card that’s co-branded with just one carrier, chances are you can extend the reach of your rewards to partner airlines within the same alliance.
In-flight discounts Use your card to pay for food and beverages, headphones, and Wi-Fi connectivity; you will likely get a discount on such amenities.
Companion flights Usually upon reaching your cardmember anniversary or when you’ve surpassed a spending threshold for the year, some airline cards will gift you with a companion certificate that allows another traveler to fly along with you practically for free.

Pros and Cons of an Airline Credit Card

An airline credit card will be one of your best friends if you’re a loyal customer of a single airline, fly with it more often than the average consumer, and regularly make use of the services that the carrier offers. Airline credit cards allow you to earn miles faster, as you earn not only from flying but also from the purchases you make with your card. They also give you rewards that are more fine-tuned to your lifestyle as a repeat customer of a given carrier, and some perks – like priority boarding – are not commonly found in other types of credit cards.

However, there are drawbacks. Unless you’re confident that you can pay off your balance in full each month, you’ll be feeling the heat of those higher-than-average interest rates. And if you don’t take advantage of all the benefits the card has to offer, then the almost certain annual fee will simply become an additional charge to burden you with. Further, you’ll need to be flexible when redeeming your miles for flights, as there are often blackout dates during which award flights are not applicable. If you’re the type that prefers the better deal, regardless of the company you’re traveling with, then a general-purpose travel credit card would make more sense to have.

All told, it comes down to your lifestyle and spending habits. An airline credit card can be a great tool if you can make it work for you, rather than the other way around. Always take time before you apply for a credit card to evaluate where you stand financially, whether it makes for your routine, and how you can make the most of the payment form that could soon be in your pocket.

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Travel Rewards Credit Cards

How to Maximize Summer Road Trip Savings with Your Credit Card

by Allan Guzman Chinchilla

Last updated on April 13th, 2023

Going on a summer road trip can create lifelong memories, but the debt you rack up can linger as well unless you put your credit card to work. You may already have (or be interested in signing up for) a credit card that is approved or otherwise endorsed by a well-known hotel chain or travel company. While they’ll go a long way when it comes to saving money, don’t ignore the substantial benefits that other types of credit cards offer. In fact, with a little foresight and the tips below, you’ll learn how to maximize summer road trip savings with your credit card before the first time your kids ask “Are we there yet?” from the backseat.

Before You Go-Go

It’s far easier to walk a cat on a leash than it is to coordinate vacation plans with most people in advance, but the discounts that you can get from making reservations using your credit card may be all the motivation they need. Groups opting to rent a vehicle instead of putting the miles on their own ride can save on fees and receive optional upgrades for free through some partnerships between select credit cards and international vehicle rental corporations. Expedited car pick-ups and drop-offs are often included among these perks too, helping ensure a customer hits the road happy. Regarding the hotel stays that you’ll be making on your summer road trip, spending time in advance to select the credit card that optimizes your lodging experience will make a big difference. There are a few well-known hotel chains that partner up with credit card issuers to release branded cards. These cards reward loyal customers for their patronage with perks ranging from huge introductory loyalty point bonuses and extended checkout hours to free room upgrades and entire free extra night stays.

On the Road Again

When it comes to gas station expenses, select credit cards offer increased cash back points for fuel purchases that can make costs more reasonable. Similar in concept to hotel cards, you can also sign up for branded credit cards that feature discounts on gas purchases for members, as well as the snacks and drinks sold in the adjacent convenience store. Speaking of snacks, some credit card companies also offer cash back cards that reward you for shopping at grocery stores. Anyone on a tight budget who wants to save money for a few souvenirs can do so by making their own sandwiches or picking up prepared grocery store meals, which are still not marked up as high as restaurant meals. If gas station sushi isn’t your thing and the local diner you come across in the middle of nowhere is the only place to get a hot meal for hours, cash back rewards for dining out are also frequently among the perks that top travel cards offer. Depending on who’s coming along for the ride, you may also want to find yourself a credit card that rewards you for making entertainment purchases, such as monthly music streaming service subscription fees and individual films to distract toddlers for an hour or two. Ask almost any parent, and they’ll tell you that the cost of renting an animated film that will grant them peace and quiet in the car is worth every penny.

Leaving on a Jet Plane

If your upcoming road trip is part of an international vacation you’re planning this summer, you can certainly save on your flights with the right credit card in hand. As with hotel cards, there are brand-specific airline cards that grant extra rewards to loyal customers. Top travel rewards cards that focus on airfare tend to waive foreign transaction fees while permitting free checked bags on flights, issuing companion airfare certificates for free trips, and even allowing priority boarding and disembarking on flights. Don’t leave your travel discounts up to chance this summer. Take the time to carefully plan your venture in order to make the most of the incredible rewards that your credit card has to offer. It will be worth it for the extra tchotchkes alone.

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