types of credit card

On a Credit Card Hunt? A Detailed Guide to the 8 Types of Credit Card

Are you looking for the best credit card that matches your spending habits and suits your needs? Hundreds of credit cards are available, and choosing the best can be overwhelming. However, you do not need to learn about all the credit cards in the market to select the best. All you need to do is figure out what types of credit cards suits your needs.

Once you figure out your type of credit card, you can maximize your earnings based on your spending behaviors. This article will look at the different types of credit cards available to help you choose the best credit card.

8 Kinds of Credit Cards

Here is a look at the different types of credit cards and how they work based on your spending and financial goals.

  1. Rewards Credit Cards
  2. Cash-back Credit Cards
  3. Travel Rewards Cards
  4. Business Credit Cards
  5. Student Credit Cards
  6. Secured Credit Card
  7. Co-Branded Credit Cards
  8. Store Credit Cards

Close-up image of woman paying with credit card in cafe

1. Reward Credit Cards: Best for Everyday Expenses

Reward credit cards will earn points or cash-back based on your spending percentage. Some cards offer bonus points when you spend on popular categories such as gas, groceries, or dining outs.

Rewards cards offer different ways of redeeming your points, including gift cards, statement cards, and merchandise. This means these types of credit cards great for your everyday expenses. You earn travel rewards and cash back on the purchases that you must make every day.

Advantages

  • Offer bonus points on popular spendings such as gas, groceries, and dining
  • Offer cash-back and travel rewards based on your spending

Disadvantages

  • Offer a few ways to redeem your points

3 Best Rewards Credit Cards

Credit card name

Benefits Fees and Fharges

Capital One VentureOne Rewards Credit Card

Best travel card and no annual fees No annual fees
Blue Cash Preferred® Card from American Express Best for everyday purchases

$0 intro annual fee for the first year, then $95

Citi Premier® Card – Best for everyday purchases and travel rewards

$95

 

2. Cash-back Credit Cards: Best For Groceries and Dining

Cash-back credit cards earn you statement credits or cash back on your spending. However, the amount of cash-back ranges from one card to another. Cash-back credit cards will deposit the rewards directly into your bank account. Some cards offer bonus points in certain categories, while others provide a flat spending rate. Other cards change the bonus rewards every quarter and flat-rate rewards on non-bonus purchases.

Most cashback credit cards have no annual fees, or if any, they are modest, usually under $100. If you plan to use your credit card on specific categories like dining and groceries, it is advised to take a bonus credit card, but if you plan to use the card on everyday spending, it is best to go for flat rate care.

Advantages

  • Most cashback credit cards do not charge an annual fee
  • Generous cashbacks

Disadvantages

  • Offer limited ways to redeem your points

3 Best Cash Back Credit Cards

Credit card name

Benefits Fees and Charges

Citi® Double Cash Card

Best for up to 2 percent cash back $0
Discover it® Cash Back Best for rotating cash-back categories

$0

Capital One SavorOne Cash Rewards Credit Card Best for cash back on dining

$0

 

3. Travel Credit Cards: Best for Business Traveler 

Travel credit cards earn rewards geared towards travel. This means you will earn travel credits for points you can transfer towards your travel expenses for live hotel and airline programs. Some cards let you earn specific travel programs, like the hotel loyalty program or frequent flyer program.

If you are an avid traveler, you should look for luxury travel credit cards that allow exclusive perks like annual travel credits, airport lounge access, and other TSA PreCheck and Global Entry credits. You do not need to spend money on travel to earn points on most of these cards, and you can make non-travel-related purchases to make your next trip affordable.

Advantages

  • Earn points toward travel

Disadvantages

  • Limited options to redeem your points

3 Best Travel Rewards Credit Cards

Credit card name

Benefits Fees and Charges

Capital One Venture Rewards Credit Card

flexible travel rewards $95
Chase Sapphire Preferred® Card beginner travel card

$95

American Express® Gold Card travel rewards on dining

$250

 

4. Business Credit Card: Best for Business Owners

Business credit cards let you keep your personal and business expenses separate and enables you to earn points from your business spending. Business credit cards can be general rewards credit cards, cashback credit cards, secured credit cards, or travel credit cards. However, you must have an income-generating activity to qualify for one to get one.

If you have good business credit, you will be eligible for the card, and you can benefit from all your business spending. A sound business credit card will help you easily track your expenses and have a generous reward program to help boost your business’s bottom line.

Advantages

  • Earns points for business expenses
  • Boosts your business’ bottom line

Disadvantages

  • Redeeming points is limited to air miles and cash back

3 Best Business Credit Cards

Credit card name

Benefits Fees and Charges

The Blue Business® Plus Credit Card from American Express

Ideal for everyday business expenses $0
Ink Business Unlimited® Credit Card Best for unlimited cash back

$0

American Express Blue Business Cash™ Card Best business card for startups

$0

 

5. Student Credit Cards: Best for Young People with Limited Credit

Student credit cards are starter credit cards great for young people with a limited credit history. Its application requirements are not as stringent, making it easy to get approved. Most cards do not charge annual fees and have perks for each dollar spent and good grades. They also have low interest on balance transfers.

You can quickly build your credit if you build your students’ credit cards with good financial habits. However, some applications may require some form of credit history or security deposit to set the credit limit.

Advantages

  • Easy to get approved without a credit history 
  • Allows young people to start building spending habits

Disadvantages

  • Available to students only

3 Best Student Credit Cards

Credit card name

Benefits Fees and Charges

Deserve® EDU Mastercard for Students

Great for student cards without a good credit history $0
Discover it® Student Cash Back Best for rotating cash-back bonus categories

$0

Petal® 2 “Cash Back, No Fees” Visa® Credit Card Best student starter card

$0

 

6. Secured Credit Card: Best for People who want to Build their Credit from Scratch

Most credit cards do not need collateral. However, a secured credit card requires you to place a cash deposit to secure your credit. While putting down a security deposit for a credit card might not seem convenient, it is the fastest way to get approved. It is an efficient way to build your credit from scratch or rebuild your credit score and credit limit.

Advantages

  • The easiest way to get approved for credit
  • It offers an easy way to build your credit

Disadvantages

  • You have to put down a cash deposit for approval

3 Best Secured Credit Cards

Credit card name

Benefits Fees and Charges

Capital One Platinum Secured Credit Card

secured card for building credit $0
OpenSky® Secured Visa® Credit Card secure card for no minimum credit score requirement

$35

Discover it® Secured Credit Card Best-secured card with rewards

$0

 

7. Co-Branded Credit Cards: Best for Individuals Affiliated Specific Brands

Traditional issuers issue co-branded credit cards like Citi, Chase, and American Express. They are store-branded and include airline credit cards that earn your mile on a frequent flyer program or hotel credit cards that earn points through a hotel loyalty program.

A Rewards credit card from a co-branded card is limited to only one brand, but their rewards are usually more solid and are worth more than cash back.

Advantages

  • Offer valuable rewards

Disadvantages

  • You can only earn or redeem points from a specific brand

3 Best Co-Branded Credit Cards

Credit card name Benefits Fees and Charges

Southwest Rapid Rewards® Priority Credit Card

Best overall Southwest card $75
Delta SkyMiles® Platinum American Express Card Ideal for Delta Air Lines perks

$250

Hilton Honors American Express Card Best Hilton card with no annual fee

$0

 

8. Store Credit Cards :Best for People Who Shop at The Same Store

Store cards are issued by retail stores and let customers earn points on their purchases from the stores and pay for them over time. These cards are only used for a specific store, but some can be used in a range of family stores.

Store credit cards often have higher interest rates when compared to general credit cards and charge deferred interest. This means you will get a low interest rate or no introductory rate for a certain period, but if you fail to pay the total amount, you will be charged a retroactive interest. However, if you can pay off the credit on time, you can take advantage of the rewards programs in the store.

Advantages

  • You have access to store reward points
  • Allow users to charge their purchases on the card and pay for them over time

Disadvantages

  • Charge higher credit card interest rate than the general credit cards

3 Best Store Credit Cards

Credit card name

Benefits Fees and Charges

Amazon Prime Rewards Visa Signature Card

Ideal for Amazon.com shopping $0
Costco Anywhere Visa® Card by Citi Great for Costco shopping

$0

Capital One Walmart Rewards® MasterCard no-annual-fee grocery rewards card

$0

 

Related Questions (FAQs)

1. How Do I Choose the Best Credit Cards?

Here are some crucial steps you can follow to figure out the right credit card for you:

  • Check Your Credit Score

Your credit score will play a huge role in determining the type of credit card you qualify for. A high credit score will give you access to excellent credit cards with travel perks and rewards. You will be limited to several credit cards if you have a fair or poor credit score or credit line.

However, you can still use the credit cards you have access to build a solid credit score. You can also try to boost your credit score by paying all your bills on time, lowering your credit utilization, and mixing different types of credit.

  • Compare Different Reward Programs

If your goal is to earn rewards, ensure that your chosen credit card delivers your desired rewards. If you select travel rewards or cash-backs, ensure your reward program aligns with your goals.

  • Assess Your Debt

If you have high-interest credit card debt or other loans, you might consider getting a balance transfer credit card. This card lets you consolidate all your debt in your introductory APR period.

If you do not have any debt and do not want any, you can focus on other credit card benefits like cash back and rewards. It is also important to know the minimum payment each month on your cards. The minimum payments will ensure that you maintain a good credit score.

  • Write Down Your Goals

Before you get a new credit card, you need to figure out what you want to achieve with the card. Do you want to secure lower interest rates, or do you need to improve your credit score? Maybe you want to travel all the time and want a card for the travel perks.

There are no right or wrong goals when picking your credit card, but you have to know what you want to achieve in the long run.

  • Access the Fees and Other Costs

Ensure you access all the fees and carrying costs associated with your credit card of choice. You should consider the credit card interest rate and all the other fees, including late fees, annual fees, over-the-limit fees, application fees, and additional charges you might need to pay.

adult asian female buying stuff with her credit card

2. What is the Different Between Debit Cards and Credit Cards?

Debit cards are prepaid cards that you can use to make purchases, but most do not offer rewards. Credit cards, on the other hand, allow holders to spend on credit while earning rewards from the card issuer.

Debit cards do not have minimum payments or finance charges because the balance is withdrawn from your deposits.

3. What is the Average Interest Rate Charged on Credit Cards?

The interest charge on cards depends on different factors, including your credit score, the card issuers, and the type of cards. The average credit card interest was 20.66% at the time of this writing.

Read Also: Cancel Credit Card and How to Increase Credit Card Limit.

Conclusion

There are many types of credit cards you can choose from based on your lifestyle and spending. It is essential to compare the different credit card fees and all the carry costs to ensure you get the best deal. You should also consider the late fees, annual fees, over-the-limit fees, application fees, and other charges you may have to pay.

Key Takeaways

  • Reward credit cards earn your cash back or points on a percentage of your spending.
  • Secured cards require you to put down a deposit to get approval.
  • Student credit cards are great for people who want to build their credit score.

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