Tis the season for “extra” credit card use by many consumers – running up more debt than usual – which makes it a good time to review the various types of cards available and related pros and cons for acquisition and usage.
Standard credit cards are the most common and readily available from most banks and financial groups.
They are unsecured, which means you do not have to put down a security deposit to prove the money can be repaid, but the annual percentage rate – or APR – may vary. Here are two examples:
Balance transfer credit cards allow consumers to transfer a high interest credit card balance onto a credit card with a low interest rate.
Typically, these cards offer an introductory APR of 0 percent; with that introductory or “teaser” rate lasting several months up to a year. Make sure to read the Terms and Conditions so you know what the APR will be once the teaser period is up.
Low interest credit cards offer either a low introductory APR that jumps to a higher rate after a certain period, or a single low fixed-rate APR. Low interest cards can be very useful when consumers need make a large purchase because it allows several months to a year to pay it off with very low or no interest. Again, read all the terms and conditions so you will not be surprised by fees or accumulated interest.
Airline mile/frequent flier credit cards are specifically designed for air travel.
While certain general reward credit cards allow points to be redeemed for plane tickets among other things, this type of card allows consumers to earn airline mile credits whenever they make purchases.
Some cards are co-branded with a specific airline, while some are generic and can be redeemed for tickets with a variety of airlines. Points can be redeemed for airline travel, much like frequent flier miles.
Airline-specific credit cards are associated with one airline. Usually the cardholder accumulates points from both making purchases with the card and by flying on the specified airline. These cards come with other perks. For example, some allow you to earn double points when you use the card to purchase plane tickets with that airline, get priority boarding and avoid baggage fees.
Generic airline miles cards allow you to redeem your reward points for air travel through any airline, travel agent or online travel site.
This is a great option for people who aren’t involved in a frequent flier program and aren’t loyal to any particular airline. It allows you the flexibility of redeeming your miles with whichever airline best suits the needs of your trip.
With a generic airline card, you gain points for every dollar spent on the card, but because it is not associated with an airline, you can’t gain additional points by flying. Each airline credit card is a bit different, so be sure to read the card’s terms and conditions to find out how many miles you gain for every dollar spent.
Other things to look for are how many miles you need before you qualify for a free plane ticket, if there is a cap on points that can be earned annually and whether unused airline miles expire. Some expire in five years (or less) while others do not expire at all.
Airline mile reward programs can be costly for credit card companies, so many of these cards come with an annual fee. This type of reward program is beneficial for frequent travelers or those who want to use their card to plan vacations, but the associated fee might make them impractical for other cardholders.