User:Creditland
From RL-Glue
Specialty Credit Cards And What They Can Do For You
There’s a whole lot of choice in the competitive world of credit, and it can be difficult to understand what you’re really being offered, especially if you’re new to the world of credit. Credit card companies love to send offers to prospective clients, but what do terms like pre-paid, secured, and 0 balance transfer really mean? The following is a quick breakdown of some of the most common specialty cards on the market.
Common Specialty Cards
Pre-paid: Pre-paid credit cards are great for children, students, or for people who want a safe way back into the credit system. Available to anyone, these cards are essentially debit cards which act like a credit card when you make a purchase. They have no interest charges or monthly billing, since they are attached to a bank account instead of a credit agency, but they are subject to any account fees customary to your bank.
Much like a debit card, the credit on pre-paid cards is limited to the amount you have in the attached bank account, which automatically pays off the debt as you make credit purchases. Of course, this means that your available credit gradually dwindles until you re-fill the account. Because these cards are so easy to get, even with bad credit, and to manage, they make great credit entry cards, but they do have one major disadvantage. Most credit cards report your usage and payment history to the three major credit bureaus, Experian, TransUnion, and Equifax, allowing them to calculate your credit score.
Pre-paid credit cards do not, which means that they don’t affect your credit, either negatively or positively. Staying in good standing with your pre-paid account is not without its reward, however, because your bank will likely offer you a secured credit card- one of the entry level cards for building up good credit.
Secured: Secured cards are similar to pre-paid credit cards in that you initially deposit a set amount which then becomes your credit limit. However, this is where the similarity ends. Rather than becoming an automatic payment fund for your credit purchases, your secured balance acts as a kind of security deposit to be used in case you renege on or miss a payment. It’s up to you to make your monthly payments and manage your interest- a secured card works the same way a regular credit card offers does, with a monthly bill, interest rates, and late fees.
Another very important difference between secured and pre-paid cards is that your secured credit agency will report to the three major credit bureaus, so good behavior eventually adds up to a better credit score. If you’ve got bad or no credit, unsecured credit cards with low interest rates can be literally impossible to get. Secured credit cards are the best way to build or repair your credit score, and graduate to a good unsecured credit card.
Group Specific: Some credit card companies offer specialized credit deals for certain groups of people, along with group specific incentives and benefits. Many offer student credit cards, for example, and offer special rates for students with an above B average. The Chase credit card company even has a special plan for military personnel, which offers holders some pretty sweet benefits, including finance management resources, better rates and user rewards, special mortgage deals- even career opportunities.
While group specific credit cards won’t give you anything you can’t find elsewhere, they can be a handy way to get rate and benefits that may be outside your credit score rating with other major credit card companies.
Zero Balance Transfer: Available to the diligent searcher in almost any credit card type, the0% balance transfer incentive benefit is so well-liked that the term has been commandeered to apply to any card which offers it. It generally works like this: For a specified promotional period, generally somewhere between six months and a year, new card holders pay no interest on the balance initially transferred onto the card.
What this means in terms of practical value is that you can transfer a high balance from another card onto your new 0% balance transfer credit card and pay off the debt without incurring any more interest- thus paying less than you would have had to pay if you’d left in on your old card.
Like any financial undertaking, the more you know, the more likely your money and reputation are to stay intact. With checkbook rapidly becoming obsolete, credit is more of a need than a choice, but choosing wisely and knowing what you’re getting into can save you big in the long run.
