Tag Archive for ‘balance transfer’ at First Card Credit Cards

Before you apply for your first credit card or your next one, you should know the pros and cons of each type of credit card. There’s a reason why credit cards are categorized into different types, because they give different features and each one have different advantages and disadvantages.

The four basic types of credit cards you should know about are the zero- or low-interest, rewards, secured, and the student credit cards. Below are the basic pros and cons of each of the types.

Zero Interest, Low Interest and Balance Transfer Cards

The zero or low-interest cards, give you the ability to pay very little or no interest for a period of time. These cards do have time limits on them and other conditions to protect the credit card company. Sometimes the low rate applies to balances transferred from another credit card. These are called Balance Transfer Cards.

Pros of a Zero Balance Card
The advantage of the zero-interest type of credit card is, of course, credit card companies are lending you their money for zero interest. You don’t have to worry about finance charges ballooning your balance since the card doesn’t charge an interest. If they do charge an interest, they charge only very minimal rate.

Cons of a Zero Balance Card
The disadvantage is that the zero or a low-interest rate only lasts for a limited period of time, usually less than a year. After that the company will charge you their regular rate. They only offer zero or low-interest rate card for an introductory period.

You should choose a Balance Transfer card only if you seriously intend to pay down your credit card balances. Click here to see the Top Rated Balance Transfer Cards.

Rewards Credit Cards

The next type of credit card is the rewards credit card. The name says it all about this type of credit card because it gives rewards to the owners if they frequently use the card to pay for their expenses or even for every purchase made using the card. This type is best for people who use credit cards in almost all their expenses and have no problem meeting their monthly credit card bill.

Pros of a Rewards Credit Card
The bottom line advantage of this credit card is that you get money back for every purchase you make in this card. Some cards give points depending on the amount of purchases you make. You can redeem the accumulated points later in exchange for cash, goods, or even credit card balance. Other rewards credit cards gives discount for every purchase. Frequent flyers can also get free mileage from their reward credit cards.

Cons of a Rewards Credit Card
The disadvantage of this type of credit card is that it often has unreasonably high annual fees. It often has huge interest rate also. Credit card companies that offer rewards credit cards give low interest rate at first but dramatically increase it after the introductory period. Make sure you ask your company whether the rate is variable or not. The rewards offered in this type of card, too, are limited. They are limited in terms of the period of redemption and the method of redemption. Be sure you read the fine print before you apply for the card.

Choose this type of credit card if you consistently use your card for purchases (such as business expenses) and pay your balances down consistently. Click Here to see the Top Rated Rewards Credit Cards.

Secured Credit Card

Another type of credit card fit for people who want to establish credit for the first time or those who want to reestablish lost credit worthiness is the secured credit card type. You can get this card by depositing some amount to the issuer of the card, which is usually a bank. Base on this amount, you’ll be given your credit limit.

Pros of a Secured Credit Card
The main advantage of this card is that it’s available to those who have no credit rating to begin with or those who have lost it due to nonpayment. This type of credit card is tracked by business bureaus that establish your credit rating. In other words, if you want to repair a damage credit rating, then this card is for you.

Cons of a Secured Credit Card
The disadvantage of this type of credit card is that is has a high interest rate compared to the other types. In addition to the interest, this card also has high annual fees. Be aware also that you could incur balance higher than your initial deposit because your initial deposit only serves to offset whatever balance you have left in case your account is closed.

You should choose a secured card if you are ready to rebuild your credit history. Click here to see the Top rated Secured Credit Cards.

Student Credit Cards

The last type of credit card is designed for college and even high school students if they can get their parents to co-sign the application. Credit card companies realized that students were an untapped customers, and began offering credit cards to students with little or no experience managing credit.

Pros of Student Credit Cards
For a responsible student, a student credit card could give them numerous benefits. You can use your student credit card to establish your credit score since this is usually the first credit card you will own.

Pros of Student Credit Cards
The major advantage of student credit card is that you are given a means to obtain financial help in times when they need it most. A student credit card comes in handy in emergency situations, or when activity comes up that needs money in short notice. Because your parents co-sign and therefore supervise your spending, student cards can give you an opportunity to learn how to handle credit and financial responsible with a solid safety net backing you up.

Cons of Student Credit Cards
But since the person handling the card is relatively new to this source of money, some find this opportunity overwhelming and may not handle the situation well. This is the major cause of disadvantage for this type of card. College can be a stressful enough time as it is, and the financial consequences of mismanaging credit can often make things worse.

You should choose a student credit card if and only if you are ready for the financial benefits, and responsibilities, that come with it. Click here to see the Top rated student credit cards.

At the end of the day, you should remember that credit cards are not the same and the terms and conditions of the issuers are not the same, too. The original purpose of a credit card is to aid in the convenience of using money. Knowing the differences between each type of credit card, and their corresponding pros and cons can make all the difference.

When peace of mind hangs in the balance, moving your credit balances, through a balance transfer might be the answer – simple, safe, and swift! Chances are your mailbox is overrun daily with offers of 0% or low interest rates, decreasing your overall debt load.

With average annual interest rate charges of 16%, finance charges can make it difficult to reduce or clear credit debt. Most balance cards provide a grace period for their zero or low interest rates that allow you, the client, to pay down your balance. Once that period ends however, realize that the interest rates rise and the “honeymoon” is over. Making sure to take advantage of the benefit of whatever your clearance time is, often between six months and a year, is crucial. Otherwise, you’ve only procrastinated, pushing off the inevitable, likely resulting in greater charges than you started with.

Also important to note are bank charges, transfer fees, annual or joining fees, and other “fine print” that might be attached to the transfer. Transfer fees may be a percentage of the actual transfer, other times there is a sliding scale, making it important to realize the charges up front. The purpose of the transfer is to help reduce your charges, using monies that might otherwise go to interest fees to pay down the principal of a loan, be sure you aren’t just trading interest charges for other fees.

“Transferring your balance to a card you already have, which might be offering a low or zero interest rate, rather than applying for a new card is a good option,” said Michael Solano, Chief Financial Officer for Pioneer Credit Counseling in Rapid City, South Dakota. “Credit card companies will be making inquiries to your credit and you need to realize the impact signing on for a new card might be.”

Using balance transfers to clear credit is a positive move, making sure you don’t respend on the now freed up credit card, sending yourself in a circle, is an even better move. Put the card away, freeze it in an ice cube, cut it up and “fuggedaboutit” is the way to go. Closing the account may affect your credit score in a negative manner so just don’t use it! Remember that transferring the balance doesn’t make you not accountable, it allows you a “moment” of freedom during which you must take advantage and pay down your debt.

“It’s important to see the overall picture and there are many advantages of setting up balance transfers,” said Mr. Solano whose agency has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997. ”Knowing the exact rates you’ll be paying to begin with, and how those will change over time, is important.”

Having a plan of how much and how long it will take you to pay down your debt, before you make your transfer, will likely make you more successful. Paying down the balance to bring yourself out of “a hole,” and into the light, rather than just freeing up space on a card to make further purchases, is THE reason to move forward.

Note that new purchases to a card, that provided the low or zero balance transfer, are often charged at a higher rate, and payments made go first to the lower rate charges, those transferred. This is important because while you may be paying down one end of the debt, your new charges and higher interest rates may override your payments, getting you nowhere in the hope of reducing your debt. Keeping the card “clean” of new purchases, and just paying down the debt, is a reasonable and practical way to manage the account.

Managing and reducing is the key, not making transferring balances a habit as lenders, both within the credit card industry and those outside, want to see payments, not just movement, when considering loaning monies. In addition, managing payments, in a timely manner, is critical because on many cards, missing a payment, even for just a day, may result in voiding of the low rate of interest and APR’s, bringing you back to square one.

Making your way down the road to reducing debt can be a hop, skip, and a jump. It’s up to you to exercise your way into financial good shape!

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