There are hundreds of credit cards spread across dozens of credit card issuers. If you're looking for a credit card, start by figuring out the type of credit card you want. The types of credit cards on the market range from basic or "plain vanilla" with no frills to premium cards with lots of perks and benefits.
Standard or "Plain-Vanilla" Credit Cards
Standard credit cards are also called "plain-vanilla" credit cards because they offer no frills or rewards. They're also uncomplicated and relatively easy to understand.
The standard credit card allows you to have a revolving balance up to a certain credit limit. Credit is used up when you make a purchase and made available again once you've made a payment. A finance charge is applied to outstanding balances at the end of each month. Credit cards have a minimum payment that must be paid by a certain due date to avoid late-payment penalties.
While many credit cards come with the ability to transfer balances, a balance transfer credit card is one that offers a low introductory rate on balance transfers for a period of time.
Balance transfer offers vary in the promotional interest rate - some are as low as 0% - and length of the promotional period. The lower the promotional rate and longer the promotional period, the more attractive the card is - but you'll often need good credit to qualify.
Just as the name indicates, rewards cards are those that offer rewards on credit card purchases. There are three basic types of rewards cards: cashback, points, and travel. Some people prefer the flexibility of cashback rewards, while others like points that can be redeemed for cash or other merchandise. Travel rewards cards remain a favorite among frequent travelers because of the ability to earn free flights, hotel stays, and other travel perks.
Student Credit Cards
Student credit cards are those specifically designed for college students with the understanding that these young adults often have little or no credit history. A first-time credit card applicant would generally have an easier time getting approved for a student credit card than another type of credit card.
Student credit cards may come with additional perks like rewards or low interest rate on balance transfers, but these aren't the most important features for students looking for their first credit card.
Charge CardsCharge cards do not have a preset spending limit and balances must be paid in full at the end of each month. Charge cards typically do not have a finance charge or minimum payment since the balance is to be paid in full. Late payments are subject to a fee, charge restrictions, or card cancellation depending on your card agreement.
Subprime Credit Cards
Subprime credit cards are one of the worst credit card products. These credit cards are geared toward applicants who have a bad credit history and typically have high interest rates and fees. While approval is often quick, even for those with bad credit, the terms are often confusing. The Federal government has made rules regarding the amount of fees subprime credit card issuers can charge, but the card issuers often look for loopholes and ways to skirt these rules.
Despite the unattractiveness of subprime credit cards, some consumers continue to apply for the cards because they cannot get credit elsewhere.
Prepaid cards require the cardholder to load money onto the card before the card can be used. Purchases are withdrawn from the card's balance. The spending limit does not renew until more money is loaded onto the card.
Prepaid cards do not have finance charges or minimum payments since the balance is withdrawn from the deposit. These cards are not actually credit cards and they don't directly help you rebuild your credit score. Prepaid cards are similar to debit cards, but are not tied to a checking account.