Paying with Plastic? Picking the Right Card for You

Published on Aug 22, 2013 09:15 am

When was last time you saw cash come out of a wallet to fund a purchase? Plastic payment is everywhere, but have you really considered if you’re using the right kind of plastic for your financial lifestyle?

Before you choose a credit card you think is right for you, check to see if you have a solid credit score so you have an idea of the terms and conditions you will likely qualify for. Also, understand that with most cards, a hefty interest rate is likely to come with the card. Be sure you’re comfortable with taking on the responsibility of monitoring your credit card use before you sign the dotted line.

Here’s a primer on the types of payment cards available:

Credit cards – Paying with a credit card is essentially taking a loan from the credit card issuer. You can choose to pay the balance in full right away or carry all or part of it over to the next month. The company will charge you interest on the principle you’ve borrowed until the balance is paid. Your payment history influences your credit score. Use your card wisely and you will likely see your credit score rise. Abuse the card and you could end up with a mound of credit card debt.

Charge cards – Like a credit card, you borrow from the issuer. But with a charge card, you must pay the full balance the next month, and you’ll likely pay a substantial annual fee for the card.

Debit cards – Tied to your bank account, a debit card is much like paying cash. The money comes directly out of your savings or checking account so there is no interest to pay. Debit cards, however, don’t always carry the same level of consumer protections as credit cards and won’t impact your credit score.

Secured credit card – Not to be confused with a debit card, a secured credit card – usually issued by a bank – requires you to make a deposit with the bank for an amount equal to the credit limit on the card. The deposit is security; if you default on a payment, the bank will take the money from your deposit. However, you’ll get a monthly statement, just as you would with any credit card, and you’ll be expected to pay accordingly so the bank doesn’t have to tap your security.

Pre-paid card – This is essentially a debit card. The difference is, you purchase – “pre-pay” a set amount on the card. A pre-paid card usually won’t build your credit score, but you also won’t need a credit check to apply for one.

Now that you have the basics of the different credit cards available to consumers, educate yourself on the specific terms, conditions and benefits of the individual credit cards you’re interested in applying for. Don’t forget, a strong credit score is based on how well you manage your finances. Be sure you’re comfortable with your personal budget so you can be better prepared to take on the additional responsibility of a credit card.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2013, Inc.  All rights reserved.

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