Credit Card Perks and Incentives

Types of Credit Cards

MakingCents, Credit Cards-- Types of Credit Cards.

When it comes to credit cards, you have lots of options. Here's a quick look at the types of cards that are available.

If you're going to carry a balance, you'll want one with a low interest rate. But if you'll pay off your balance each month, the rate will be less important. Let's talk about some other types of credit cards.

Many retailers, like department stores and gas stations, offer their own credit cards. They aren't usually issued by a financial institution and they may be easier to qualify. Just be aware that although they can help you build credit, they can have high interest rates.

Rewards cards will give you cash back or points based on your purchases. You can redeem your points for cash, travel, gift cards, or merchandise.

If you're willing to pay an annual fee, premium cards offer additional perks, like priority airline boarding, early access to concert tickets, and hotel upgrades, but you'll pay at least $50 or more a year.

What if you don't have much credit or you're rebuilding your credit? Consider a secured credit card. You deposit money into an account as collateral, like a security deposit. For example, if you put $250 into a deposit account, you can make $250 in purchases. Some secured cards even earn rewards.

Whatever your lifestyle, there's a credit card for you.

Navy Federal Credit Union. This is not a commitment to lend, and conditional/subject to the verification and accuracy of the information submitted to Navy Federal. This video is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Incentives and Rewards

These days, many credit card companies offer some type of rewards program or incentives. These can include:

no balance transfer fees and super-low interest for a limited time
a low introductory rate on new purchases and balance transfers for a limited time
cash rewards: Cash back as a percentage of your purchase transactions
gas and grocery store rewards: Earn cash back or points for using a card at a particular retailer
travel rewards: Earn points toward airfare or hotel prices
sign-up bonuses: Earn money just for opening an account

Balance Transfers

A balance transfer can help you save money on high-interest debt by moving that debt to a card that charges a lower interest rate specifically for balance transfers. Some cards offer 0% interest for up to 18 months as long as you make the minimum monthly payments. However, many credit card issuers charge a balance transfer fee of between 3% to 5% of the transferred amount. (Tip: Navy Federal and some other financial institutions don’t charge a balance transfer fee.^* Be sure to ask.) Transferring a $5,000 debt at a 5% fee would add another $250 to your pre-existing debt.

Paying off one credit card with another can be a financially smart move, especially if it means going from paying 20% interest on your charges to paying 0%. For instance, you would have to make 12 monthly payments of $463.17 to pay off a $5,000 debt at 20% interest. When you transfer that debt to a 0% interest card, your monthly payments drop to $416.67. When you subtract the 5% transfer fee, you still save $258.04 over a year’s time.

The key is to pay off the transferred balance in full before the promotional interest rate expires. If you don’t, the new card may charge an even higher interest rate on the remaining balance than the card you first transferred the debt from.

*Rates are variable and will vary with the market based on Prime Rate.

Cash Advances

You can use your credit card to do more than make purchases. You can also take out cash. You can withdraw funds at a credit union, bank or ATM with your credit card or use convenience checks supplied by the card company.

Borrowing against your credit card can be a quick way to make it through tight times, but be careful! The interest rate on cash advances is often significantly higher than on purchases. Plus, the interest charges start accumulating as soon as you take out the money. In addition, you may pay a transaction fee for the cash advance. This may be a flat rate, a percentage of the withdrawal or a combination of both. Some credit cards have a different credit limit on cash advances than on purchases. You may pay extra fees for going over your cash withdrawal limit.

Travel Protection

Vacations are supposed to be relaxing, fun adventures, but sometimes things can go wrong. Some mishaps may be covered or reimbursed when you use your credit card to pay for certain travel expenses, like airfare and rental car reservations. You need to check with your credit card issuer to see what types of travel protection, if any, you are entitled to. Examples of travel protection include:

Travel cancellation insurance: If an emergency, illness or death in the family interferes with your travel plans, you can recoup the costs of non-refundable flights.

Travel delays: Some companies will reimburse you for meal and lodging expenses if your flight is delayed or canceled due to certain conditions, like weather issues.

Travel accident insurance: If you’re injured or killed while traveling by plane, train, bus or boat while on vacation—and you paid for the ticket with your credit card—you or your survivors may receive a cash payout. Medical problems (such as heart attacks) aren’t covered, although some cards offer a separate travel insurance plan for a fee that covers certain medical expenses during travel.

Rental car collision insurance: A majority of credit cards will cover the cost of fixing damage to a rental car. You don’t need to pay extra for the rental car company’s insurance.

Lost luggage insurance: Some credit card issuers will reimburse you for items if the airline loses your checked bag.

Incentives and Rewards

Balance Transfers

Cash Advances

Travel Protection

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