Understanding
Credit Cards
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Transferring Credit
Card Balances
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Not all credit cards work the same way. Cards can carry different privileges and different responsibilities for the cardholder. There are a number of different kinds of cards.

No-Fee Cards
No-fee credit cards do not charge you for the card. These cards generally carry a higher interest rate. Some have penalties for late payments, too. Know what you are getting when you sign up for a card. There is no such thing as a free lunch or free credit card.

Cards with Limited Credit
If you have a history of slow or bad debt or have a limited debt history you may have to start with a limited credit card—one with a low limit. The cards generally carry an application fee, but they do allow you to establish (or re-establish) credit after it's been damaged. Consistent payments lead to an improved credit history.

Low-Interest-Rate Cards
Low-interest-rate cards make carrying a balance from one month to the next less costly. Because the card has a low annual percentage rate (APR), finance fees stay low, but these cards have limited benefits and services.

Cash-Reward Cards
Cash-reward cards offer a rebate on purchases made with the card. Depending on the card and on how much you spend each month, this can mean between .025 percent and 2 percent of the amount charged each month coming back as cash back. Some cards apply the rebate to the monthly statement; others send you a check once a year.

Business Cards
These cards are used by business managers to make business-related purchases. Cardholders can take advantage of various discounts for business-related services and products. The cards also provide quarterly and/or yearly financial reports to aid in bookkeeping and filing income taxes, but they cannot be used for personal purchases.

Secured Cards
Secured cards are another way to improve damaged credit. You deposit money into a savings account that acts as collateral against your credit line. They generally offer limited benefits and services. Secured cards are often complex to set up and have higher fees than other cards.

Home-Secured Credit Cards
These credit cards are connected to a home equity line of credit. Each time the card is used, it's like taking out a mortgage loan and using your house as collateral. Home-secured credit cards are almost always a bad idea for one simple reason—the potential consequence of nonpayment is loss of your home by foreclosure.