Overwhelmed yet? There are so many cards out there it is starting to get confusing. This article will briefly explain the main differences between the plastic cards we hear so much about. From there you can narrow it down to the type of card you actually need or even don’t need. Whether your in the market for a new card or just need to know what all the hoopla is about, this will at least help you get your cards in order.
Credit Cards
A credit card is a card that allows the user to buy goods and services based on their promise to pay it back. The card issuer gives the card holder a line of credit based on their creditworthiness. The card is a revolving line of credit which does not need to be paid in full. There will be no late fees as long as the minimum payment is made by the specified date, usually every thirty days. Any remaining balance is carried forward and interest is charged according to the cardholder agreement.
As we know, there are credit cards that are better than others. There are cards designed for those with excellent credit and cards designed to help those with bad credit. In fact, there are credit cards that are designed for just about anyone from students to big businesses. The main thing to take away from this your credit history is important when applying for a credit card and you are promising to pay back whatever funds you borrow from the card issuer. If you do not full fill your end of the agreement your credit can be damaged.
Charge Cards
A charge card is different from a credit card, but they often are used as one in the same. When a charge card is used, the card holder has to pay back the entire balance on the card by the due date. The due date is usually every thirty days. If the full amount is not paid off then heavy fees can be applied to the account and even card restrictions can be put into place.
Some charge cards do have the option for users to pay for certain purchases off over time. For example, American Express, offers the option to enroll in their Extended Payment Option which allows cardholders to pay for purchases over $200 over time. They also offer a Sign & Travel which allows for travel-related purchases to be paid off over time as well. In order to be approved for a charge card you have to have excellent credit.
Prepaid Cards
A prepaid credit card is a re loadable card that you have to deposit funds on before you can use. Your card balance is based on the amount you deposit to the card. It is not tied to a checking or savings account and it is not a line of credit. It also does not matter what type of credit you have. Prepaid cards are available to anyone 18 years and older. If you have bad credit and a history of credit problems you can still use a prepaid card. As a matter of fact, some prepaid cards can even help you build your credit.
Once the funds on the card are depleted, you just add more money to the card. There are many ways to add funds to the card like at a store location or direct deposit. You can only use the amount on your card which means you can not go into debt or overdraft this type of account. Prepaid cards are a safe alternative to using a credit card or even checking account. The account does not charge interest and these cards can not hurt your credit, only help it. There are numerous prepaid cards on the market and you can now even find ones that offer rewards. Prepaid cards are not just for those with poor credit, there are many great reasons to use a prepaid card.
Debit Cards
A Debt Card is a bank issued card that is tied to a bank account like a checking account. When the card is used the funds are electronically withdrawn from the checking account it is linked to. Debt cards are often called Check Cards or Bank Cards, but they are all the same. Using a debt card is an alternative to using cash or writing checks. Debit cards also allow for the user to withdraw money from their bank ATM (with not additional fees). When using your card to make an ATM withdraw you use your PIN (Personal Identification Number). Debit cards are extremely popular and now you can find banks that offer extra rewards for using their debit card.
Gift Cards
A Gift Card is a card that has a fixed amount of funds loaded onto the account by the purchaser. Once the money on the card has been used the card can not be reloaded. These cards are very popular for gifts because you can purchase the card from the recipients favorite place to shop. Since cards have become the big thing, gift cards have replaced gift certificates. Many store offer store gift cards and you can even purchase Visa or MasterCard gift cards which can be used anywhere. These Visa and MasterCard gift cards look exactly like prepaid cards, but as we now know they work differently.
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