There are four major types of credit cards: bank cards, travel and entertainment cards (T & E cards), retail store cards, and oil company cards. Applications and interest rates for each type of card may be different. When using a credit card, the consumer agrees to the terms of the credit card company. Read these terms carefully and understand them before using the card.

Retail store cards. Retail credit cards are issued by department stores and other companies. If you have a retail store card, you may be notified of special sales before the general public. These cards offer revolving credit at a pre-established credit limit. Finance charges are added to your bill if you do not pay in full each month. Most retail stores also accept bank cards.

Bank cards. The two major bank cards are MasterCard and VISA. You may use bank cards to charge motel and restaurant bills, merchandise, airline tickets, services, and some cards allow cash advances. Interest on a cash advance starts the day you get the money and continues until you pay back this loan.

Some cards are offered without fees, some are included in a total banking package, and others charge a yearly membership fee. You are granted a bank card based on your credit record. Your credit record also determines the maximum amount you can charge. You may request to have this limit raised if you establish a good credit history while using the bank card.

The interest charges for bank cards range widely, so it’s worth shopping for a low interest rate if you don’t pay your bill in full each month. If you fail to make the monthly required minimum payment, this is reported and shows up on your credit report. You can have your account cancelled.

Some companies use banks to sponsor their own MasterCard and VISA cards for their customers. For example, the American Automobile Association offers a AAA/VISA card that can be used to charge no-fee travelers checks, and obtain a 30-day, interest-free $300 emergency cash loan and emergency airline tickets if needed while traveling. More and more universities, organizations, travel clubs, and even political parties are sponsoring credit cards. If you support their goals, you can make a contribution to them when you make a purchase by using an affiliated (affinity) credit card.

Oil company cards. Oil companies offer their own credit cards and most accept VISA and MasterCard.

Travel and entertainment cards (T & E). Consumers must apply for travel and entertainment cards such as American Express, Diners Club, and Carte Blanche and are charged an annual membership fee. Card holders are billed for purchases every 30 to 60 days. They are expected to pay each bill in full. Failure to pay promptly may result in a poor credit report, interest charges, and eventual cancellation of the account.

Some T & E cards offer card holders additional services such as group life and accident-and-health insurance, cash advances and gift catalogues. Free travel insurance is frequently provided when T & E cards are used and they may offer to stretch payments for large bills over a three- to six-month period.