A credit card allows you to borrow money to buy things. There is a cost to borrowing the money, interest and fees, but there is a benefit in that you can build credit and some credit cards even offer rewards.

You can start building credit history the moment you get approved for a credit card. You’ll have to pay a bill every 25-30 days and if you pay your full balance in before that time period you will not have to pay interest. If you don’t pay it off you will have to pay interest and this is the way these companies make money.

Pros & Cons of Credit Cards

Pros of Getting a Credit Card

  • You are able to make larger purchases and pay it off in smaller amounts.
  • Typically it’s more convenient than carrying tons of cash.
  • You can build credit fairly quickly if you’re responsible.
  • Several credit cards give you rewards.

Cons of Getting a Credit Card

  • You can get into debt very easily if you’re not careful.
  • It is easy to overspend due to how simple it is to use credit cards.
  • If you miss a payment or max out your credit cards you can drop your credit score heavily.
  • Interest rates can be very difficult to manage and you won’t always get favorable terms, even with good credit, on some cards.

Types of Credit Cards

There are several types of credit cards. There is no defined number of them but they are often bucketed into three major categories:

  • Secured Credit Cards: A card where you place a security deposit down before they open up a line of credit.
  • Store Credit Cards: A card where you can only use it at the store you applied with.
  • Charge Cards: A card that can be used anywhere and comes with standard fees.

Credit card offers are designed for specific types of users. They setup these cards to appeal to different consumers in various financial situations, hobbies, and interests to balance out the risk they take.


A list of the most common credit cards:

  1. No Annual Fee Credit Cards
  2. Cash Back Credit Cards
  3. Travel Rewards Credit Cards
  4. Airline Credit Cards
  5. Hotel Credit Cards
  6. 0% Purchase APR Credit Cards
  7. Balance Transfer Credit Cards
  8. Student Credit Cards
  9. Business Credit Cards
  10. Starter Credit Cards
  11. Credit Cards for Fair Credit
  12. Secured Credit Cards
  13. Unsecured Credit Cards for Bad Credit
  14. Store Credit Cards
  15. Charge Cards

Choosing a Credit Card

The key to choosing a credit card is to understand how you will use it.


If you are just starting to build credit you’ll want to find cards that can help. Cards dedicated for students or a secured credit card is the way to go. These will generally require a deposit but are a good way to start building credit.


If you plan to pay your credit card balance in full and on-time each month you should look at credit cards that earn rewards. A rewards card is a good match but they do come with higher APRs due to the awards they give. You can find cards for cash back, travel, or points you can redeem for other rewards.


If you plan to carry a balance, in other words you don’t plan to pay it off each month, you should get a card with a low interest rate. A low interest of 0% APR card can be a great match.

Understanding Interest and Fees

The credit card companies make money off of you via interest and fees. If they weren’t able to make money off of interest and fees they wouldn’t be able to offer all of the rewards to drive people to apply.


Transaction Fees & Card Fees: Transaction fees are paid for by merchants, not you. You may see some fees like a late payment or annual fee.


Interest Payments: If you don’t pay off your debt in full each month you’ll have to pay interest payments each month based on whatever interest rate you were given.


There are a number of fees a credit card company may charge so you’ll want to verify all the fees you could be charged for. Most cards won’t offer an annual fee unless there is a rewards program or are designed for people who have bad credit.


If you make sure you pay at least the minimum payment you can avoid late payment fees which typically cost around $35 per late payment.

How do you Get Started with a Credit Card?

Getting your first credit card is rather difficult for most. People with limited or no credit history will find it hard to get their first credit card.


However, it’s not impossible.


There are a lot of first-time credit card offers to take advantage of but you’ll most likely want to find a secured credit card to build credit. This means that you’ll have to put down a security deposit for the credit card and it is usually the same amount that you’ll have available to you on your credit card. Keep in mind that most credit cards do not start reporting to credit bureaus for your credit report, for example FICO tends to take a few months before they start accepting payment records to calculate your credit score.


When considering getting started with a credit card, make sure you consider your reasons, budget, and habits to ensure you are able to use it wisely. Learn more about credit card use tips to make the best credit card decision.