March 22nd, 2011

Credit and Charge Cards: What’s Your Plastic Personality?

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card choice

The average Credit Karma user has about 6 open credit card accounts, according to our data for February 2011. Many of us manage at least part of our money in plastic, so know the ins and outs of the different options that exist to determine what kind of card works best for you.

Whether you’re in the market for another credit card or are just starting out in the world of credit, here’s a quick guide to the pros and cons of each type of card.

Cash back credit card


  • You get cash back for your purchases. Smart tip: Earn more on your cash back bonus by putting it into a savings account.
  • Your cash back can’t be devalued, like rewards points can, because a dollar will always equal a dollar.
  • The cash you earn can be redeemed for anything, rather than the pre-determined products or services the issuer offers.


  • High cash back rates, around 5%, are reserved for specific spending categories; otherwise, cash back is typically 1% on most purchases.
  • There’s a limit to how much cash you can earn annually.
  • Cash back cards typically have high interest rates.


Choose a cash back credit card if… you use your credit card for regular purchases often, and pay your monthly balance in full. If you truly want to get the full benefit from a cash-back program, you’ll need to rack up card purchases to maximize your cash back payout. However, make sure you aren’t carrying any balance month to month or the interest charges basically negate your cash back earnings

Recommended: Chase Freedom. Pay attention to the revolving categories, so you know which purchases will earn you 5% cash back. Plus, this card doesn’t have an annual fee.

Rewards points credit card


  • You may receive special offers and promotions, like double points or discounted gift cards.
  • You can redeem points for rewards you can’t get anywhere else, like travel packages, concierge service, access to special products or services, and airline miles.
  • You’ll have access to exclusive events and perks unique to each card.


  • The specific offers, travel deals, gift cards, and flight carriers may not always appeal to you or be useful to you.
  • There are often airline blackout dates or restrictions that limit how you can use your earned mileage.
  • These cards generally have an annual fee.
  • The rewards points can expire, have a capped amount, or have other limitations.
  • These cards typically have a high interest rate.


Choose a reward points credit card if… you travel a lot or tend to put large expenses on your credit card and want to earn rewards. If you want your card to work for you to score shopping sprees, travel packages, or airline miles, it might be worth it to get a rewards card. However, most rewards cards require excellent credit, and also come with a high interest rate unsuitable for carrying large balances

Recommended: Capital One® VentureSM Rewards Card. With this card you get two airline miles per dollar on every purchase. There is no limit on the miles you can earn, and they don’t expire.

Store credit card


  • Since many store credit cards offer a large discount when you first apply for the card, it allows you to save big on a one-time purchase.
  • Typically, it’s easier to get approved for a store card.
  • You can save money at a store you frequent, such as Wal-Mart, which offers cash back on purchases.
  • Some cards offer interest-free financing for the first six months.
  • Some cards offer loyalty and rewards programs.


  • Getting store credit cards can become a bad habit, since stores make it easy for you to conveniently apply at checkout. Careful; each inquiry will knock your credit score down several points.
  • Store cards are notorious for high interest rates. If you carry over a balance on your Macy’s card, you’ll pay 24.5% in interest.
  • Store cards can lead to impulse buying or unnecessary shopping. You may buy something that you don’t need just to get the card perks.


Choose a store credit card if… a large portion of your shopping is done at a few stores and you are disciplined enough to always pay off credit card balances every month. You can score discounts at stores where you already shop, but be careful that your card doesn’t tempt you to frequently shop. Also, make sure to read the fine print on whatever store card you decide to apply for.

Recommended: Target® Credit Card. You can get up to 5% back in rewards on Target shopping trips and this card can be used anywhere Visa Credit Cards are accepted.

Secured credit card


  • No credit check is required and approval is usually guaranteed, perfect for poor credit consumers.
  • It’s great for building credit, and the security deposit safeguards you from defaulting on payments.
  • Your own cash deposit is used as your credit limit.


  • Initial security deposit requirements start at $49, $99, or $200
  • It typically requires a one-time activation fee or an annual fee.
  • It doesn’t usually come with any additional perks or rewards.
  • Credit limits tend to be lower, from a few hundred to a few thousand.


Choose a secured credit card if… you have no credit history or are recovering from a bankruptcy or a foreclosure. A secured credit card is the best way to build your credit from ground zero.

Recommended: Capital One® Secured Mastercard®. You can get a credit limit of up to $3,000 with this card, and you won’t pay any processing or application fees.

Charge card


  • The biggest perk is that there is no preset spending or credit limit.
  • There’s no interest accumulated because balances are paid off every month.
  • It builds your payment history without the risk of getting you into huge debt.
  • At present, charge cards aren’t factored into your credit utilization ratio, which means if you have a large balance one month, it won’t affect your credit score.


  • You must pay off your balance in full every month. If one month you can’t pay it off, you’ll face expensive penalties.
  • You’ll pay an annual fee, anywhere from $25 to $450.
  • You must have good to excellent credit to be approved.
  • The issuer can limit your spending privileges if it seems like you are at risk of defaulting on your payment or overspending.

Choose a charge card if… you need an unlimited credit limit and are accustomed to paying off your balance every month.

Bottom line: Credit personalities come in all shapes and sizes. There is a card that’s right for you, so take the time to research each card’s terms and fine print to find which has the benefits you want and need for your spending style.

Choose according to the card that fits your spending needs, but also remember that the card should be appropriate to your credit score range. Applying for any one of them will result in a hard inquiry on your credit, dropping your score several points, so gear your search towards cards you have a chance of approval for.

For consumers’ honest opinions on credit cards, check out our Credit Card Reviews for over 500 credit cards to narrow your search.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.


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