Different Types of Credit Cards Essay

Published: 2020-02-10 17:53:02
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INTRODUCTION

In this assignment, I am doing a particular study about the different types of credit cards. A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holders promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date. The size of most credit cards is 85.60 — 53.98 mm (33/8 — 21/8 in), conforming to the ISO/IEC 7810 ID-1 standard. Credit cards have an embossed bank card number complying with the ISO/IEC 7812 numbering standard.

Credit cards

Credit cards now are of various types with different fees, interest rates and rewarding programs. When applying for a credit card, it is important to learn of their diverse types to know the one best suited to their lifestyle and financial status. Different types of credit cards available by banks and other companies/organizations are briefly described below.

Standard Credit Card:

This is the most commonly used. One is allowed to use money up to a certain limit. The account holder has to top up the amount once the level of the balance goes down. An outstanding balance gets a penalty charge.

Premium Credit Card:

This has a much higher bank account and fees. Incentives are offered in this over and above that in a standard card. Credit card holders are offered travel incentives, reward points, cask back and other rewards on the use of this card. This is also called the Reward Credit Card. Some examples are: airlines frequent flier credit card, cash back credit card, automobile manufacturers rewards credit card. Platinum and Gold, MasterCard and Visa card fall into this category .

Secured Credit Card:

People without credit history or with tarnished credit can avail this card. A security deposit is required amounting to the same as the credit limit. Revolving balance is required according to the buying and selling done. The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus.

This allows building a positive credit history. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card.

Limited Purpose Credit Card:

There is limitation to its use and is to be used only for particular applications. This is used for establishing small credits such as gas credits and credit at departmental stores. Minimal charges are levied.

Charge Credit Card:

This requires the card holder to make full payment of the balance every month and therefore there is no limit to credit. Because of the spending flexibility, the card holder is expected to have a higher income level and high credit score. Penalty is incurred if full payment of the balance is not done in time.

Specialty Credit Card:

It is used for business purposes enabling businessmen to keep their businesses transactions separately in a convenient way. Charge cards and standard cards are available for this. Also, students enrolled in an accredited 4-year college/university course can avail this benefit.

Prepaid Credit Card:

Here, money is loaded by the card holder on to the card. It is like a debit card except that it is not tied up with a bank account. This is directly connected to savings account. The payments from this card can be made until there is balance in the account. Low Interest Rate Credit Cards: This credit card is highly useful as they will have low interest rates.

Business Credit Cards

Credit cards that are specifically for business use only. They give the privilege for business owners to have an easy method of keeping and separating personal and business transaction. This credit card is available for businessmen who have large scale, small scale or medium scale business to look after. This card is highly useful for facilitating businessmans training programs, travel and entertainment programs.

Gold Credit Card:

Gold credit cards are made for higher income groups who also have higher credit rating. It is a status symbol and is considered prestigious. The features of gold credit cards are: Cash withdrawal limit is higher

Credit limit is higher

Provides one Add-on card which can be given to either, spouse, children or parents of the credit card holder Provides many privileges such as travel insurance, reward points, cash back offers etc.

Platinum or Titanium Card:
P

latinum or Titanium cards are similar to gold credit cards but they have few more additional benefits. The additional features may differ from bank to bank. Few common features are listed below: Protection against credit card loss and theft.

Protection against online fraud transactions

Protection against sickness and injury by an accident.
There is no yearly fee

Silver Credit Card:

Silver credit cards are the standard credit cards available and most of the employed people with 4 or 5 years experience can own this type of card. The features of silver cards are: Lower membership fees

The applicant need not be a high- salaried person to buy silver card. The interest rate is 0% initially between 6-9 months when transferring account balance from one credit provider to another one. If the credit history of the card holder is good, the credit limit provided will be the same as provided to other credit cards.

There are many other types of credit cards sold in India. Few are mentioned below:

Rewards Credit Card:

This card has rewards attached to it on based on usage of the card, for e.g. A card may offer 5% discount on fuel, if it is used to buy fuel and gas, or a card may offer cash back facility if a certain amount is spent through it.

Balance Transfer Credit Card:

This card is bought to pay outstanding amount of one card with the other. In this too there are cards that offer interest-free time period.

List of credit cards provided by the various banks:
Indian Overseas Bank Visa International Credit card
Axis Platinum card
Bank of Indias India Card
Gold International Card
Citibank Dinners Club International card
ICICI Bank Online card
Syndicate Global Gold Credit Card
CorpBank Gold card
Vijaya Bank Visa Gold Credit Card
HSBC Platinum card
CorpBank Classic card
Vijaya Bank VISA Classic International Card
HDFC Silver credit card

Conclusion

Here we discussed about various types credit cards that using for the simplicity in transactions. Many credit cards can also be used in an ATM to withdraw money against the credit limit extended to the card, but many card issuers charge interest on cash advances before they do so on purchases. As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes.

Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as insurance protection, rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or cashback). Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumers credit card being lost or stolen.

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