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Travel. Cash back. Balance Transfer. Airline. Small Business. With the amount of credit card marketing in America today, these phrases are becoming more and more widely recognized. According to one CFPB study, banks spend over $3B on credit advertising each year.
Even though many of you may have come across this nomenclature before, some may not know exactly what each of these different credit card types does or how they differ. How are travel cards different from airline ones? Balance transfer from zero percent cards? This article will give you a crash course in each, making you one step closer to becoming a credit card expert.
- Rewards: Generic Travel, Airline, Hotel, and Cash back. Rewards cards is an umbrella term that encompasses all credit cards that earn their users some form of prizes. Travel, airline, hotel, and cash back are the 4 major categories falling into the scope of these. Airline and hotel cards are ones co-branded with a particular company. The rewards these cards offer tend to be mainly redeemable for more nights or flights, with the affiliated company.
Generic travel cards, on the other hand, offer users greater flexibility, at the cost of rewards. These cards will generally provide consumers a lesser value per dollar, and in turn give them more travel and redemption options. Cash back credit cards are aimed at more general consumer spending - gas stations, grocery stores, etc. The rewards these cards provide are also a lot more flexible. Instead of being miles or points that you use to pay for additional travel, cash back credit cards provide users with statement credit - that is money that can be used to offset charges on their credit card bill.
- Debt Management: Zero Percent cards, Balance Transfer, Low Interest. These types of cards fall into what I call the debt management group of credit cards. Their aim is to help individuals who are dealing (or are about to deal with) credit card debt, by mitigating the negative effects of interest. Low interest cards are the most self-explanatory. They are simply cards that provide low long-term APR to account holders. Zero percent cards (sometimes referred to as 0% APR) are pretty straightforward in what they do. These cards will provide users with no interest on purchases for some set amount of time - usually anywhere between 6 and 12 months.
Balance transfer credit cards do the same, except on any credit card debt that is transferred from another card to it. Typically, there is a small fee associated with such a transaction. However, this added charge usually pales in comparison to the interest savings these cards can produce.
- Small Business Credit Cards. These cards can fall into any of the other groups we mentioned above. A major point differentiating these from other cards, however, is the fact that they are issued to companies, instead of individuals. While this may seem obvious at first, the distinction is critical. Because small business credit cards can be issued to a company, instead of a consumer, a business owner doesnt need to jeopardize his or her personal credit score in the process. While small business credit cards still require a personal guarantor, any late payments or issues will typically only reflect on the company, and not any one individual within it.
Account holders, on some of these business cards, also have the ability to export spending into different file formats, or products such as Quicken. This can greatly streamline accounting and expenditure management for a company, which is especially important around tax time.
- Secured credit cards. The last major group of credit cards worth highlighting is secured cards. These are targeted at individuals with subprime FICO scores (<600). If you have filed for bankruptcy in the past, or were delinquent on a payment, you may be in this group. Secured credit cards require users to submit a security deposit, in order to open an account (hence the name). Cardholders are then issued a credit card with a limit equal to their deposit. These cards can then be used to slowly build up ones credit score.Generally, secured credit cards come with high APR and little to no rewards. They are not intended to be anyones long-term credit card, and instead are just a temporary solution to a credit score problem.
- Cash Back, Miles, or Points: Understanding the Different Credit Card Rewards
- Credit Scores: What are they? How do they work?
- What Are Credit Card Balance Transfers?
Christmas is behind us, but the holiday credit-card bills are just now hitting our email or mailboxes and the results for some wont be pretty.
CardHub.com has estimated that Americans will have exceeded $900 billion in credit-card debt by the end of 2015, the highest amount recorded since the economic downturn.
The website has issued a reportthat calculates the impact of credit-card debt on consumers in 2,547 cities and how long it would take consumers in every one of those cities to pay off that debt based on an assortment of data.
The results show how long it can take to pay off debt.
In the case of Columbus, it would take three years and three months for the average consumer to pay off debt of $4,945. That ranks Columbus 835th on the list.
The other big cities in Ohio fared worst -- Toledo at 1,738; Cleveland and Akron tied at 1,861; Cincinnati ranked 1,911th; and Dayton came in close to the bottom at 2,464.
The holidays may have been weeks ago, but the hangover has just begun.
Credit card bills showing how much you spent in December are starting to roll in this month, and many Americans are finding that their holidays were a little too jolly.
In 2013 and 2014, balances on credit cards increased around 4 percent in December, according to an analysis by credit reporting agency TransUnion on behalf of TFT, reflecting the rise in shopping around the holidays. That growth rate is more than four times the growth rate observed in non-holiday months.
If you're shell-shocked by the large number staring back at you from your credit card bill, consider these three strategies to pay it off as quickly as possible.
Related: Why Millions of Millennials Can't Get Credit Cards
1. Bite the bullet. The most responsible and fastest way is to just pay the entire balance off, even if you need to suspend contributions to your retirement account for a few months, says John Ulzheimer, a credit expert formerly with FICO and Equifax. The interest is just too expensive and can add up the longer you wait.
"The faster you can exhaust your holiday debt, the more enjoyable 2016 will be," he said. "You don't want to get statements in April with purchases from the holidays still on them."
2. Prioritize payments. If you can't pay off your credit card bills with one big check, then pay off the most expensive balances first, says Ulzheimer. Start with the credit cards with the highest interest rate--often store credit cards--and move your way down to ones with lower rates, throwing as much money as you can at the balance. But don't forget to pay more than minimum on the other cards, too.
"It's the lesser of a variety of evils because most credit cards have high interest rates," he says.
Related: Do Americans Have a Credit Card Problem Again?
3. Try a balance transfer. Another strategy is to transfer the balance to a card that offers a zero-percent interest rate for an introductory period like 12 to 18 months, says Matt Schulz, senior industry analyst at CreditCards.com. Consider the length of the intro period--will you be able to pay off the entire balance before the intro period expires? If not, know what the interest rate will be after the intro period lapses. Calculate any balance transfer fees to make sure the transaction makes financial sense. Also, don't forget to see if there are any deadlines for completing the balance transfer, Schulz says.
"There are a lot of quirks and rules with balance transfer cards," he says.