Types of Credit Cards
There are three basic types of credit cards:
General-Purpose Credit Cards
These are credit
cards that can be used to pay for just about anything,
anywhere from clothes at department stores to meals at
restaurants as well as to get cash advances. Visa®,
MasterCard®, American Express® and Discover® cards are
examples. Many people prefer a general-purpose card because
of this flexibility.
Another advantage of using this type of card is that it allows you to track all of your purchases and/or expenses on a single bill, making payment easier. Unlike charge cards, these cards allow you to “revolve” your charges, that is, to carry over portions of your balance from month to month. If you don't pay off your charges in full from one month to the next, interest is charged on the entire outstanding balance.
Store Cards
Store cards (also known as single or limited-purpose cards)
are credit cards that can be used only in a specific store
or group of stores, or for a specific purpose. Department
store cards like JC Penney and Macy’s are examples. So are
clothing store cards like Gap and Old Navy. Be sure to read
the fine print so you know what you are signing up for. The
interest rate on these type of cards can sometimes be a lot
higher – like around 21-25%. While many of them might have a
special promotion (for example, 10% off your first purchase)
when you open an account, the higher interest rate might not
make it such a great deal after all.
Numbers calculated using Bankrate.com's Minimum Payment Calculator
Charge Cards
Traditional charge cards require you to pay for purchases or
services in one lump sum within a given period of time.
Usually, you don’t pay interest but you are required to pay
the balance in full each month. Charge cards, such as
American Express® and Diners Club, may also be called travel
and entertainment cards. Late payments are subject to a fee,
charge restrictions, or card cancellation depending on your
card agreement.
» 