There are a lot of credit cards out there today. Name a demographic or spending category, and a credit card is probably designed just for people within that category. On top of that, there are different kinds of cards, including retail and bank cards. No wonder that the average American adult has three credit cards in their wallet.

Sorting through all these options might seem daunting, but with a little forethought (and some sound advice from your friends at FirstBank), you can reap the rewards of having a card suited to your spending patterns, credit needs, and financial goals. 

Here’s what you need to know about the different types of credit cards:

Retail Cards

Retail or store credit cards give you a line of credit often restricted to a particular business or product, although some are “open-loop,” meaning they can be used more widely. The desire in this form of credit has risen recently, with 35% of Americans saying they are likely to apply for a store card. So, what are the pros and cons of a retail credit card?

Pros:

• Higher approval rate
• Store discounts and promotions
• Often, no annual fees

Cons:

• Interest rates are often higher than traditional credit cards
• Lower credit limits can raise utilization ratios and affect credit scores
• Unpaid interest can catch you by surprise on deferred interest purchases

Bank Cards*

Bank cards are issued by you guessed it, banks. They are typically a general charge card or “open-loop” and around 90 million Americans have a bank issued credit card. Bank cards tend to be a better option for everyday expenses but could also have a few drawbacks.

Pros:

• Typically, lower interest rates and higher credit limits
• Robust fraud protection
• It can be used anywhere from the grocery store to an airline or hotel
• Cash back and travel reward options

Cons:

• Lower approval rates
• Annual fees
• With higher limits, it may be tempting to accrue more debt

How Will You Choose?

Identify your financial goals.

Do you want to build credit to buy a house? Do you want to save money on gas or groceries? Build up points? Knowing where you want to end up will help you sort through the perks of various cards. 

Identify your financial hurdles.

Do you expect to have a balance on your card each month? Perhaps a card with a lower interest rate would be better for you. Do you need to use your rewards in different places and spending categories? Maybe a general charge card would be the best fit. 

Once you have your card, keep an eye on your purchases and rewards over time to see if the card is lining up with your lifestyle. To keep your credit card debt from getting out of hand, try to use the card only for purchases you can pay off in full each month. You can use various money managing tools like Mint or Personal Capital to incorporate your credit expenses into a monthly budget.

For help choosing the right card for you, or to learn more about any of the concepts covered here, drop by your local FirstBank branch or visit efirstbank.com.

*FirstBank determines actual loan qualification only after receipt of a complete loan application and analysis of pertinent information, such as (but not limited to) credit history, income documentation, and property valuation.  Subject to approval.  Fees and restrictions may apply.  See any FirstBank location for complete details.

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