Types of Credit Cards

According to statistics, the average American household carries a balance of nearly $10,000 in credit card debt.  While minimum payments on $10K might seem manageable, even at a relatively low interest rate, it will take decades rather than years to pay the balance off. To make matters worse, with talk of a possible recession looming, now is probably a good time to consider consolidating balances or transferring a high-interest balance to a lower interest or zero interest balance transfer card.  As with almost any credit application, the rate and term that you’ll receive on a typical balance transfer card will likely be based on your credit score.  This makes it even more critical that you act sooner rather than later when debt has gotten too out of hand.

The first step, as always, is to get a copy of your credit score so that you’ll have a better idea of the cards that you should apply for.  The next step is to take an honest look at your income and how much you’d be able to put toward paying down your balance each month.  If your household income is still good and you believe that you would be able to pay the balance down within the introductory period allotted by the balance transfer card, then look for a credit card that offers 0% interest.  However, if you know that you will be unable to get the entire amount paid off before the introductory period ends then you’ll be better off searching for a low interest, fixed-rate for the life of the balance.

Other Resources:

• Fighting Off Credit Card Debt
• Free Credit Report Offers
• The Truth About Credit Card Debt

Business credit cards have become increasingly popular over the past few years.  And, the credit card companies have created enticing business rewards programs that can make choosing the right one especially challenging.  As with personal credit cards, the first step to choosing a business card is to have a copy of your credit report handy.  This will save a lot of time in knowing which cards you or your business can qualify for.  Next you’ll want to have a clear picture of your credit card needs.  Consider the types of purchases you’ll be making with the card as well as whether you have employees who will need cards. 

Business credit cards will vary greatly, not only by the rate they offer, but by their rewards programs, vendor partner discounts, and available credit limit among other things.  Some of the best features that many of the more popular business credit cards are now offering are online account management features and quarterly reports. The best way to make certain that you get the right card for your business needs is to narrow down your search with the online card comparison tool and then take your time to carefully review the fine points of every offer.

Other Resources:

• Give Consumers Tools to Combat Credit Card Giants
• Personal Business; Credit Card Rewards Turn from Nouns to Verbs
• Best Credit Cards for Small Businesses
  

In my mind, one of the best features to come out of the intense competition between credit card issuers has been the balance transfer card.  Of course, it’s important to remember that balance transfer cards were developed to attract cardholders who have a tendency to carry credit card balances because that’s where they can make the most money.  Card issuers are willing to make these offers because they’re betting that you’re likely to continue to use your credit unwisely by carrying larger balances – long after the introductory low- or zero-interest offer expires.  However, you can beat them at their own game if you are willing to get serious about using the introductory period to really reduce your credit card balance. 

One key to choosing the right balance transfer card is to get honest about how long it will take to reduce your debt.  If you know that it will take longer than the term that you qualify for, such as 12 or 15 months, then you’ll want to look for a fixed-interest rate that’s good for the life of the balance.  On the other hand, if you know absolutely that you can have everything paid off before your introductory period ends, then by all means, go for the zero percent offer.  And, perhaps most important, make certain that you pay your minimum amount due on time, every time or you’ll likely lose that great rate you wanted in the first place.

Other Resources:

• Blue from American Express - Fixed Balance Transfer Rate
• What the Credit Crunch Means to You
• 4 Steps to Cut Credit Card Debt
• Book: Credit Card Debt

In today’s world there are so many credit card offers that it can get really confusing trying to find the best credit card deal. So here’s a tip – when looking for the best, start your search by making a list of the features that fit your situation.  You’ll want to get honest about how you manage your credit cards.  If you tend to charge only what you can afford to pay off each month and rarely carry a balance, then the rate won’t be as important and you’ll want to focus instead on the rewards you can get. You’ll want to pay close attention to the annual fees but once you know that you’re looking for a rewards card then you can narrow your search down by miles card, cash back, merchandise or other reward.  On the other hand, if you are carrying a high-interest balance on a credit card, then you’ll want to search in the direction of a low or zero-interest balance transfer card. The same goes for a business card, a student card or a gas card.  The secret to finding the best credit card deal is knowing which features meet your individual needs.

Other Resources:

• Low Interest Credit Cards
• Credit Card Surfers Make Most of Offers for Low Rates
• The Worst Credit Card Deals in America

When it comes to credit cards, that old saying about not mixing personal with business is especially true.  And, with all of the great business-specific features that credit cards like the AMEX Corporate credit card offer, there’s really no good reason why anyone would want to mix the two.  To better meet the needs of businesses of different sizes, American Express offers a program for businesses with revenues of less than $1 billion and a separate program for those with revenues of more than $1 billion.  And then they home in on those features and benefits that matter most like online account management, flexible options for billing and payment and a supplier network that offers significant discounts on business-related purchases. And, of course, as with all American Express cards, the corporate card comes with the unique AMEX brand of customer service which makes it a little like dressing for success for credit cards. 

Other Resources:

• Business Credit Cards
• American Express - Corporate Cards
• JD Power & Associates: 2007 Credit Card Satisfaction Study

Ask any accountant and they’ll tell you that some of their worst accounting nightmares are the result of small business owners using their business credit card for personal purchases or their personal credit card for business purchases.  For all sorts of reasons, but especially when it’s tax time, mixing the two is just bad business. 

And now, with the abundance of business reward cards, business miles cards, and business balance transfer cards, there are even more reasons to keep them separate.  Business rewards cards, like the American Express Simply Cash(SM) card for example, rewards the cardholder cash back on business-related expenses like automobile gas, office supplies, and wireless services.

Other business-specific cards offer 0% introductory APR for up to 12 months along with online reporting and quarterly reports.  Several of the more popular business-specific cards also offer free employee cards and significant discounts on business-related purchases.  When used properly, business credit cards can be valuable business management tools.  And, chances are your accountant will thank you come tax time.

Other Resources:

• Business Credit Card Issuer Directory
• Why Your Biz Needs its Own Plastic
• Small Business Credit Card Use
  

When a child goes to college or you have a family member launching out on their own cross country, it’s nice to have a safety net for emergencies.  Wire transfers or money orders can be a hassle and are usually expensive and giving them their own credit card could damage your credit.  A better option might be a prepaid credit card. A prepaid credit card or a debit card tied to a dedicated account. 

The credit limit on both debit cards and prepaid cards is based on the amount deposited on the account. Both also carry either a MasterCard® or Visa® logo and can be used for purchases like a regular credit card. 

Probably the biggest difference is that debit card purchases will be debited directly from the bank account and, in the event of an overdraft, can result in expensive charges.  On the other hand, when funds are not available on most prepaid cards, they will simply be declined.  Prepaid cards generally charge an annual or monthly service fee as well as an application fee but many of the newer prepaid card programs offer special credit card-type features such as rewards programs, online account management and integrated bill payment options.

Other Resources:

• Pick a Card, Any Card
• Debit vs Credit Cards: Pay Now, or Later
• Green Dot Prepaid Visa