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| Credit Card
Types |
| There are so many
different types of charge and credit cards, how you find the card that
is right for you? Begin by thinking about how you are likely to use
credit and then comparing the types of charge cards and credit cards
available. Some of them offer excellent value, while others may cost
more to use but provide special services you may find helpful. The best
approach is to carefully research card rates, fees and
benefits—perhaps even creating a chart for easy comparison. |
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Charge
cards provide you with the convenience of purchasing power based on
your agreement to pay the full amount of the charges due each month, so
there is no finance charge. The American Express Card for Students (the
green Card) is an example of a charge card. |
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Credit
cards provide you with a revolving loan—or credit limit—based on
your agreement to pay at least the minimum amount due on the amount of
credit you use by the payment date. A finance charge is applied to the
outstanding balance—the amount you do not pay by the due date. For
example, if you purchase $200 in one month and you pay the minimum
amount due of $15, you will pay a finance charge on the outstanding
balance the next month. The American Express Credit Card for Students
(the blue Card) is an example of a credit card.
You can avoid paying finance charges by paying your balance in
full—that is, paying off the outstanding revolving loan balance.
However, revolving credit cards give you the flexibility of making
minimum payments when that is most convenient for you. The cost of this
convenience is the finance charge.
Typically, credit cards have a revolving credit limit. That means that
as soon as you pay for credit you have used, it becomes available again.
For example, if you had a credit limit of $500, then spent $100, your
available credit would be $400 until you repaid the outstanding $100,
when your available credit would be $500 again. |
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General-purpose
credit cards are credit cards that can be used to pay for just about
anything, any where from clothes at department stores to meals at
restaurantsas well as to get cash advances. American Express, Visa,
MasterCard and Discover cards are examples. Many people prefer a
general-purpose card because they can use it in many different
establishments. Another advantage of using this type of card is that it
combines many different types of expenses in a single bill, making
payment easier. |
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Single
or limited-purpose credit cards are credit cards that can be used
only in a specific store or group of stores, or for a specific purpose.
The JCPenney Regular Charge Card and the Radio Shack Answer Plus are
examples. Some people prefer to have separate credit accounts, such as a
gasoline credit card, a credit card at a chain or specialty store, plus
other cards. |
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Premium
cards such as Platinum or Gold Cards are charge or credit cards that
offer additional benefits such as travel upgrades, special insurance or
exclusive seating for concerts. Generally, premium cards require a
substantial income and an excellent credit history, offer a higher
credit limit, and may charge higher fees. To find out if you qualify for
one of these cards, call the company's toll-free number to learn about
application requirements and costs. Apply only if you fulfill the
application requirements, and if the card provides you with benefits and
services you believe to be worthwhile. |
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Affinity
credit cards are associated with specific organizations and offered
to people affiliated with those organizations. Generally, an affinity
credit card is co-sponsored by the organization it is associated with,
and the organization receives a percentage of the sales or profits
generated by the card. The Penn State MBNA Visa Card is an example.
Rates, fees and benefits of affinity cards vary widely, and may make
these cards more expensive to use than similar, non-affiliated cards.
People who use them generally do so to help support an organization or
cause they care about. |
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Co-branded
credit cards are co-sponsored by two companies and have benefits and
rewards designed specifically for their joint customers. For example,
the American Express Delta SkyMiles Card is a co-branded credit card for
people who travel frequently on Delta Airlines that offers Cardmembers
exclusive travel discounts and other benefits. Other popular co-branded
cards are available to owners or prospective owners of automobiles,
investors in mutual funds and credit union members. |
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Secured
cards are credit cards guaranteed by a bank account or deposit made
by the applicant. The credit limit is based on the amount of deposit and
may be the same amount or larger. Secured credit cards are useful to
establish or improve a credit record, particularly if someone has never
had credit or has a poor credit history. The APR on a secured credit
card is usually higher than on an unsecured credit card. Application and
processing fees may also be required. Interest may or may not be paid on
your deposit. |
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Stored-value
or "smart" cards look like credit cards but are actually
prepaid cards. A stored-value card has a set value which decreases as
the card is used. For example, a $10 phone card is programmed to provide
$10 worth of service. When the card value is depleted, you buy another
card.
Smart cards are more flexible because they contain an integrated
microship that can be programmed to provide information codes as well as
financial information. The prepaid value of a smart card decreases as
you use the card but can be increased by paying for additional value.
Many colleges issue smart cards that give students access to food
services, vending, photocopying, laundry, telephone and other purchases
as well as access to the library, laboratories and other secured areas
on campus. |
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Debit
cards look like credit cards and can be used in many places where a
credit card is used. The difference between a credit card and a debit
card is that a debit card accesses the money in your bank or investment
account to pay for purchases. The payment amount is transferred from
your account to the merchant's account the same day—you do not have a
"float" of a few days between the time of purchase and payment
collection. An advantage of a debit card is that you can't spend money
you don't have—you don't create debt—because you aren't buying on
credit; you are paying with funds in your bank or investment account. A
disadvantage is that debit cards are not subject to many of the consumer
legal rights that apply to credit cards regarding returns, resolution of
errors, fraud or other issues. |
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ATM
cards are used to get cash and complete other transactions at a bank
machine or automatic teller machine (ATM). Many ATM cards can be used in
selected computer networks, such as Cirrus, HONOR, NYCE and STAR. For
example, your ATM may work in any bank, supermarket or other store that
is part of the Cirrus network.
ATM cards are increasingly being used as debit cards
as well. Like all debit cards, the money for these purchases is
transferred out of your account within that day's business cycle. If you
aren't sure if your ATM card is also a debit card, you can call the
Customer Service number on the back of your card and ask the
representative. |
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