If you've decided to get a credit card, the next question is what type of credit card. While all credit cards have different terms and rates, credit cards can be further divided by the types of entities that offer the credit cards. There are essentially two types of credit cards: general credit cards and retailer credit cards.
General Credit Cards
General credit cards are offered by a bank or credit card company and can be used in any location that accepts credit cards. These types of credit cards are what we generally think of as traditional credit cards.
There are two types of general credit cards. One type is a secured credit card. With a secured credit card, you provide a security deposit to the credit card company, which then uses the security to set your credit limit. If you don't repay the balance on the card, the company keeps the security deposit. The other type is an unsecured credit card. With an unsecured credit card, you don't have to provide a security deposit.
Retailer Credit Cards
Retailer credit cards are credit cards offered by a retailer for use with only that retailer. These can be offered by clothing stores, department stores, gas companies or any other type of retailer. Typically, when you open an account, you'll be given some incentive or reward such as a discount on your purchases with that retailer. Before you open a retailer credit card account, remember that you can use that card only with that retailer and possibly some of their affiliates. On the other hand, you can use general credit cards at that retailer and all others.
A retailer credit card, despite its limited use, may appear on your credit report just like any other credit. So each time you attempt to open a retailer credit card or are given a retailer credit card, the credit inquiry or credit line may appear on your credit report. This may affect your credit report negatively, especially if you generate a lot of inquiries by applying for numerous retailer credit cards.
Before opening a retailer credit card, consider whether it will be a benefit. Many retailers offer lucrative incentives or have loyalty programs that can make it worthwhile to carry their credit card. This is especially true if you are a frequent customer of the retailer. However, if you are using a retailer credit card and not a general credit card, you may be losing out on accumulating points in the rewards program of the general credit card. Consider your needs and determine which type of credit card will meet those needs best and allow you the financial success you are working towards.