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Types of Credit Cards

Nowadays, a credit card is considered one of the most convenient and secure payment methods for purchasing goods and services online or in stores. Basically, it is a line of credit provided by a financial institution that allows consumers to borrow money to pay for products and services.

When selecting the right credit card in Dallas, it's crucial to consider your financial situation and spending habits. Would you travel frequently and benefit from a travel rewards card? Or perhaps you're looking for a card with a low APR (Annual Percentage Rate) to help manage your monthly expenses more efficiently. Whatever your needs, Dallas credit cards are likely tailored to meet them.

Various card types are available based on your needs and lifestyle. This article describes the most popular card types and their benefits.

Travel Perks

Travel credit cards are cards made expressly for paying for travel expenses. They are like rewards credit cards in that they offer rewards when you use them to make travel-related purchases like flights, hotels, or rental cars.

Travel credit cards offer rewards designed to benefit travelers. You can earn rewards such as flexible travel credits, which can be applied to any travel-related purchases, or travel points, which can be transferred to airline or hotel programs, earning you free airfare or a hotel stay.

These types of cards are best for people who frequently use their credit cards to pay for travel expenses, such as business travel, meetings, or even personal-related travel.

Cash Back Cards

Cashback credit cards allow you to use credit to make purchases and cover expenses while also allowing you to earn a percentage of the cash you spend using the card. This means that for every qualified purchase you make, you will receive a percentage of your payment back as a discount.

For example, if your credit card offers a 3 percent cashback on every transaction, you will receive 3 cents in cash back for every dollar you spend. Cashback credit cards typically provide a fixed percentage back on all transactions, but some offer higher cash-back rates on common items like groceries, gas, or restaurant purchases.

Reward Points

Rewards credit cards are a special type of credit card that offer rewards every time you use them and pay your credit card bills on time. The rewards can come in the form of cashback, points, or travel miles whenever you use your credit card to make purchases or payments.

Rewards credit cards allow you to use your rewards in various ways, depending on your specific credit card. To get the most out of a rewards credit card, it's best to choose one that aligns with your current spending patterns and offers rewards that match your goals, such as shopping and travel goals.

For example, some credit card companies allow you to choose the reward you want to receive, such as points against purchases or cash back in a fixed dollar amount after spending a certain amount. Explore the options they offer and choose the one that best fits your habits.

While other types of credit cards are available, such as starter, student, business, co-branded cards, and store credit cards, they all fall into some cashback or rewards points category. To truly find the best credit cards that work for you, it is a good idea to evaluate your credit cards every year to ensure you are receiving the benefits offered with the card and taking advantage of those pers.

It might surprise you to learn that in addition to the advertised reward offers from the credit card company, there are additional perks and rewards that you may be missing out on simply because you are unaware of them. These additional benefits may include extended warranties, return protection, rental car discounts, and more.

Building and Maintaining Credit

Oftentimes, when young people are just starting out on their own, or if they have not made many major credit purchases like a home or car in their lifetime, they may find their credit score lacking. While you do not have bad credit, your credit file may not have enough credit history to prove to lenders and creditors that you are financially responsible.

Applying for a Dallas credit card is a wise choice to help build your credit score and increase your spending power. The key to building and maintaining a good rating with the credit bureaus is using the credit card at least a few times a month and making at least the minimum payment or paying it off. This provides a good rating when they report to the credit agencies and builds a reliable payment history for creditors to refer to when they apply for another loan, such as a car or home. If you have a credit card and don’t use it, you are not doing anything to increase your credit rating and change your credit profile.

Breaking down the five key factors of determining your credit score:

Payment History (35%)

Meaning: This is the most significant factor in your FICO score. It looks at your track record for paying bills on time, including credit cards, loans, and other financial obligations.
So: Consistently making payments on time helps build a positive payment history, while late payments, missed payments, or defaults can significantly harm your score.

Amounts Owed (30%)

Meaning: This factor considers the total amount of debt you owe compared to your available credit, often referred to as your credit utilization ratio.
So: High credit card balances relative to your credit limit can negatively affect your score. It’s recommended to keep your credit utilization below 30%.

Length of Credit History (15%)

Meaning: This factor evaluates how long you’ve had your credit accounts. It includes the age of your oldest account, the age of your newest account, and the average age of all your accounts.
So: A longer credit history generally contributes to a higher score, as it provides more data on your financial behavior.

Credit Mix (10%)

Meaning: This assesses the variety of credit accounts you have, such as credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans.
So: Having a mix of different types of credit accounts can positively affect your score, as it shows you can manage different kinds of credit responsibly.

New Credit (10%):

Meaning: This factor looks at recent credit inquiries and new credit accounts. Opening several new accounts in a short period can be seen as risky behavior.
So: Each hard inquiry (when a lender checks your credit for a loan or credit card application) can lower your score slightly. However, the effect is usually temporary.

Understanding these factors can help you manage your credit more effectively and build your FICO score over time.

America’s Credit Union Can Help

There is no set amount of credit cards you are required to carry, but it is definitely a good idea to have at least two or three different types of cards.

America’s Credit Union offers a Visa card with below-market interest rates to help you pay off your higher-rate cards first. The card has no annual cash advance or balance transfer fees and does not have a higher rate for cash advances. It helps you plan, save, and spend responsibly while building your credit history.

You can track your spending and payments through online banking and a mobile app that helps you make timely payments. For those online purchases, Visa protects you through its zero-liability policy, which guarantees you won’t be held responsible for unauthorized charges made with your account.

A robust credit card department, such as the one at America's Credit Union, can help you determine whether you qualify for a Platinum or Classic card.

When used wisely, credit cards can help you build and maintain your financial health. They can raise your credit score, provide substantial rewards to offset travel expenses, and offer purchase protection. Credit cards can be an invaluable tool for better money management. Banking with America’s Credit Union in Dallas, Texas, opens opportunities to improve your financial journey today and in the future.

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