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Types of Credit Cards

There are essentially two types of credit cards - secured and unsecured. A secured credit card is one that a card holder secures with a savings deposit to ensure payment of the outstanding balance if the card holder were to default on payments. Secured credit cards are generally used by people who are new to credit, or people trying to rebuild their poor credit ratings. Unsecured credit cards are not guaranteed by any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which utilize property as collateral.

All credit cards fit into one of the following three categories:

Bank Cards - cards issued by banks - examples are Visa and MasterCard.

Travel and Entertainment (T & E) Cards - examples of this type of card are American Express, Diners Club and Carte Blanche. Travel and Entertainment and National House cards have the same terms and conditions wherever you apply.

House Cards - consist of local and national retail cards such as Sears, Bloomingdale's or Macy's and gasoline companies such as Shell, Mobil or Chevron.


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