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Types Of Credit Cards

Types Of Credit Cards

There are all different types of credit cards. There are travel, rewards, cash back, secured, prepaid, low interest just to name a few. With all these different types of credit cards how do you decide what’s best for you? It’s actually not too difficult. But there are a few key things you need to consider.

Choose From The Various Types Of Credit Cards:

Which credit card you choose from the various types of credit cards really depends on what rewards and perks you want. Usually the choice is between three major types of credit cards. There are Travel Cards, Rewards Cards and Cashback Cards.

Travel Cards: Travel credit cards usually offer airline miles as rewards. The rewards rate can vary but for good cards is usually around 1.25 miles per $1 in spending. Airline miles come in many different forms but the most common is Aeroplan and Airmiles. Travel cards also typically come with other travel perks like travel insurance, rental car insurance, lost baggage insurance etc.

Rewards Cards: Rewards credit cards usually offer specific rewards. You typically get rewards points for a specific store or a specific hotel chain. These points can then be used for purchases at those establishments. These cards are good if you use a specific store or hotel chain a lot.

Cashback Cards: Cashback cards are simple an easy to use. The typical cashback rate is 1% on all purchases and a bit higher on some select categories like gas or groceries. These cards are great if you don’t see yourself using travel or rewards points.

Along with these major types of credit cards there are also some more specific ones. These types of credit cards are more for a niche market with specific needs.

Low Interest: Low interest credit cards are great if you have a balance or don’t pay off your credit card in full each month. Interest rates on low interest cards are usually a few percentage points lower than other types of credit cards.

Secured: Secured cards are great for people with no credit or with bad credit. A secured card is backed by a deposit that is given upfront. That deposit is usually equal to the credit limit of the card and is held as long as the card remains active. In all other regards a secured card acts like a regular credit card with monthly payments etc. This makes it good for building credit history.

Prepaid: A prepaid card is like a re-loadable gift card that works at all stores. With a prepaid card you load money onto the card and then spend up to that amount. Once that amount is gone you have to re-load the card with additional funds. There are no monthly payments with a prepaid card which is why it’s not great for building credit history but it could be great for an emergency card for a teenager.

Student: Student credit cards are geared towards college/university students who may not have a lot of credit history. Usually limits are quite low and interest rates can be higher than average. These cards are easier for students to get and can help build credit history while learning how to use credit responsibly.

Choose The Best Rewards:

All major types of credit cards offer rewards of one kind or another. When we rank the best credit cards Canada we’re looking for at least a 1% return on all purchases. In fact the cards we’ve chosen as the best credit cards in Canada usually have a higher return than this.

When choosing from the various types of cards you should compare to our list of the best credit cards in Canada to make sure you’re getting the best return on your purchases.

Choose The Right Credit Card Provider:

A credit card provider is the company that processes the credit card transactions. In Canada there are a few main credit card providers to choose from.

Visa: Visa says it’s “the leading credit card program in Canada” and this is likely true based on the large number of merchants that accept Visa cards.

MasterCard: MasterCard is also a very large credit card provider in Canada. It’s cards can be used at most merchants in the country.

American Express: This is a smaller credit card provider in Canada. American Express has fewer merchants than either MasterCard or Visa. This means that your American Express card wont be accepted in as many places. This is why American Express is usually chosen as a second card if someone has a Visa or MasterCard already.

Choose Your Credit Card Issuer:

The credit card issuer is usually a financial institution like a bank or credit union. This would include the big six banks as well as most credit unions. But it is also possible to get credit cards from issuers that specialize in just credit cards.

It’s usually easier to get a credit card from your local bank or financial institution. Because they already have a lot of your customer information on file it can be an easy process to get a new card.

It is also possible to get a card from an issuer that specializes in just credit cards. These cards are usually a little more specialized. They could be easier to get (but come with lower limits and higher interest rates). Or they could come with higher rewards rates.

In the end it depends on what offers the best return and is most convenient for you.

Types Of Credit Cards:

As you can see there are many different types of credit cards. There are also different types of credit cards providers as well as different credit card issuers. Choosing the best credit card for you will depend on what you need from the card, the provider and the issuer.

Good luck!

 

Check Out The Best Credit Cards In Canada!

 

Photo by Porto Bay Trade via Flickr

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