Eric Rosenberg
11 min
947
There are thousands of different credit cards U.S. consumers have to choose from, and there’s no one best card or even type of card out there.
Depending on your credit score, how you spend your money, and your personal preferences, one may be better than all the others.
But if you don’t spend a lot of time thinking about credit cards, choosing the right type can be overwhelming. To help, we’ve put together a list of the 10 types of credit cards and how to choose the right one for you.
Every credit card is different, but they all tend to fall into 10 categories. We’ll cover each in turn and include some pros and cons to consider. This guide is meant to provide you with information to help you determine the credit card types that are the best fit for you and your individual needs.
Cash-back credit cards offer cash rewards on most — if not all — of your purchases. Additionally, some of these cards also offer a cash sign-up bonus that you can earn after spending a set amount during your first few months with the card.
Depending on the card, you can typically redeem your cash rewards as a statement credit, direct deposit, paper check, or for gift cards.
There are three main types of rewards structures for cash-back credit cards:
Cash-back credit cards typically don’t charge an annual fee, but some do. At the same time, they don’t offer large sign-up bonuses that you can get with travel credit cards. People like cash-back cards because they provide flexible redemption options, but they often don’t offer a lot of extra frills.
Examples:
Travel rewards credit cards offer cardholders points or miles on every purchase, and many offer large sign-up bonuses worth hundreds of dollars.
There are four main types of travel credit cards:
Travel credit cards typically charge annual fees, but some of them don’t. They also provide cardholders with a lot of benefits and ways to get free travel. But they’re more limiting on how you can redeem your rewards.
Examples:
Some credit cards charge low interest rates on every purchase you make. While the average interest rate for a credit card is around 15%, these cards often charge in the single digits.
Unfortunately, major credit card issuers don’t typically offer low-interest credit cards. But your local credit union or bank may offer them.
These credit cards are great for people who carry a balance from month to month or want a low-interest card to use for emergencies. But they typically don’t offer rewards or any other major perks.
Example:
To entice consumers to apply for a credit card, some card issuers offer an introductory 0% APR on new purchases for a set period. Depending on the card, this period can be as short as three months or as long as 18 months.
These cards are great if you have a large purchase coming up and you want the option to pay it down interest-free. Some 0% APR credit cards even offer rewards and a sign-up bonus, making the card a lot more valuable.
However, you may not get the same level of rewards and benefits as a card with no 0% APR deal.
Examples:
In the same vein as the 0% APR credit cards, there are some credit cards that offer an introductory 0% APR deal on new balance transfers.
Some credit cards offer this deal for as long as 21 months, giving you plenty of time to pay down a high-interest balance entirely interest-free.
Most balance transfer credit cards charge a balance transfer fee, though, which is typically 3% or 5% of the transfer amount. Also, many of these cards don’t offer rewards or any other major benefits, making them less valuable after the promotion ends.
Examples:
If you have no credit or you’ve made some credit missteps in the past, a secured credit card can help you build your credit history. These cards function similarly to regular credit cards with just one exception: they require an upfront security deposit.
That deposit, which is typically equal to your desired credit limit, will stay with the card issuer in case you default on the account.
You can typically get it back when you close the account, but some cards give it back sooner, effectively transitioning you to an unsecured card without requiring you to open a new account.
Secured credit cards often charge annual fees and high APRs, but some don’t. While the idea of a security deposit isn’t ideal, your options may be limited, especially if you have bad credit.
Examples:
If you’re brand new to credit and you’re a college student, an alternative to a secured credit card is a student credit card.
These cards are only available to students — you typically need to provide information about your school when you apply — and they typically offer some basic rewards and benefits.
However, they can be a great way for a college student who has limited options to build credit for the first time.
Examples:
Most of the top retailers have a store credit card that’s tailored to loyal customers. These cards are usually easy to get, even if you have bad or no credit. And while they typically don’t charge annual fees, they do charge high APRs.
What’s more, you may be limited on where you can use them. With some, you can only use the card when shopping at that specific retailer. With others, you can use the card virtually anywhere.
Store credit cards typically offer rewards, discounts, and other promotions for that given retailer. They’re great for people who shop at one retailer frequently but may tempt you to overspend if you’re not careful.
Examples:
Charge cards require that you pay your balance in full each month. They don’t charge an APR but do charge a steep fee if you miss your payment. There are only a handful of charge cards on the market and they tend to assess high annual fees.
Some, however, offer great rewards, making them a good option for someone who has no problem paying their balance in full each month.
Examples:
If you’re a small business owner, you can choose to use any credit card you want for your operating expenses. But small business credit cards tend to offer rewards and benefits specifically tailored to the needs of business owners.
For example, some cards offer bonus rewards at office supply stores or on advertising or shipping. Others provide cardholders with expense management tools to help with their account and taxes.
Business credit cards tend to offer higher credit limits than consumer credit cards, but they also tend to charge less favorable APRs and fees.
Examples:
With so many different types of credit cards out there, it’s not always easy to pick the right one. To make things easier, there are three primary things to consider when considering which card to choose.
If you have bad or no credit, you’re limited on which cards you can choose from. Rewards credit cards and cards that offer a 0% APR promotion of some kind typically require a good or excellent credit score.
However, there are cards designed for people who are working to build their credit that you can use until you can qualify for a better card.
Take a look at your budget and consider how much you spend in different areas. If you spend a lot on groceries, consider getting a card that offers bonus rewards on grocery purchases. The same goes if you spend a lot on gas, eating out, or any other everyday purchase.
If you don’t spend a lot in any one area, consider a card that offers a flat rewards rate on all purchases. You can even get a flat-rate card for most of your purchases and a tiered-rewards card for bonus spending.
No one can tell you whether travel or cash-back rewards are better for you, and a store credit card could be a better fit for you than a secured card. As you look at different credit cards, think about what you want in a credit card and which one would best fit your needs.
There are many credit cards out there, but the right one for your friends and family members may not be the right one for you. Take the time to consider each of the credit card types to find the right fit for you.
It may not sound important now, but getting the right card could add a lot more value to your spending over time.
Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
This article was last updated December 7, 2018 but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.
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Ben is a money and travel writer living in Utah. He has spent the past 10 years studying and working in the financial industry.
Ben has written for sites such as NerdWallet, USA Today, Money, Credit.com, Credit Karma, and US News.
Ben loves giving people the tools they need to improve their financial health.
When he's not writing, Ben enjoys planning his next vacation, reading, and eating chips and salsa. You can connect with him at BenLuthi.co.
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The 10 Types of Credit Cards
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