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It may seem incredible, but credit card issuers clog the mails with over 2.5 billion offers inviting people to apply for a credit card. Even those who would not qualify for a conventional credit card due to serious credit problems are now able to get one; some credit card issuers even specialize in this particular type of market. And according to financial gurus, there are at least a billion credit cards in active circulation throughout the United States alone.

Credit has been an economic cornerstone for some time now. Surveys show that the average American household is estimated to have at least twelve credit cards, including charge cards. While you may tend to think that one credit card is pretty much the same as the next, there are in actual fact distinct characteristics for each different credit card type. It is good to know these difference between the three different types of cards in the market: a bank credit card, a travel credit card, an entertainment credit card (although nowadays the combined travel and entertainment card has become more common) and a retail credit card or house card.

Bank Credit Cards

You have probably noticed that most credit cards bear either the logo of Visa or MasterCard together with the name of the bank. It would appear that the credit card has been issued by either Visa or MasterCard. That is not quite an accurate assumption: these two companies do not issue credit cards directly to the consumers. Most of the credit cards on the market today are offered by thousands of banks around the globe. Each bank is linked to the credit card association, because are not allowed to issue any kind of card unless they are association members.

Visa is a privately held membership association, although it is preparing to go public. It started as an association of banks in California and the West Coast. There are over 20,000 financial institutions in the membership rolls, and virtually all of them offer Visa Card. MasterCard is also a membership association, similar to Visa, and originally consisted of member banks in the East.

A bank credit card is in reality a revolving credit line. When you receive your statement, you can pay all or part of your balance each month, run up the balance again and so on. Being a credit line, the account comes with a pre-determined credit limit that depends on key factors like disposable income, credit history, etc. The credit limit can be as low as a $100 or as high as many thousands of dollars.

It is possible for card holders to get themselves into trouble when they do not properly manage the revolving credit line. When you carry a balance instead how to become a payment processor of paying it off, the credit card issuer starts charging interest on that balance — in some cases, this interest could be pretty steep. The interest rate varies widely, depending on who issued the card, but you could expect the average credit card interest rate to be at about 18 percent.

For instance, if you carry forward a $1,000 balance for 12 months, you pay $180 in interest per year or $15 every month. If you maintain a $1,000 savings account, you will earn about $40 in interest per year. Those who get into trouble will have to reduce debt, and one of the more common ways to go about this, is to arrange for credit card debt consolidation, which helps lighten the interest burden.

Travel and Entertainment Card

Travel and entertainment cards are similar to bank credit cards in the sense that holders can charge purchases at various stores and locations. However, they are also different from bank credit cards because they are offered directly by the credit card companies, namely, American Express and Diners Club.

This credit card type was once accepted primarily at travel- and entertainment-related businesses such as airlines, hotels, restaurants and car rentals. Nowadays, all other establishments, such as upscale department stores, gas stations and drugstores, accept them. Like any bank card, the typical travel and entertainment card of today offers the menu of features that most credit card holders have come to expect, such as frequent flyer miles, luggage insurance and collision insurance coverage on rented cars.

A further difference between travel and entertainment cards, and bank cards, is that travel entertainment cards do not carry an extended line of credit. This means that you will are required to pay your outstanding balances in full, either within one or two billing periods, in order to for the account to stay current.

Both travel and entertainment credit card providers, such as American Express and Diners Club, also deliver categorized summaries of expenses charged to the credit cards at the end of each year. This certainly is a convenience at tax time.