With hundreds of credit cards available in the market today catering to all kinds of customers, it can get overwhelming trying to figure out which one to get. Credit cards have become an indispensable part of our financial portfolio for convenience, security, rewards, building credit scores, and more. Selecting the right credit card tailored to your lifestyle and spending needs is crucial to maximizing the benefits credit cards have to offer.
In this blog post, we will explore the 10 most popular types of credit cards and their distinct features. Understanding the difference between these major credit card varieties can help you zero in on the right card according to your spending habits, financial goals, credit history, and other personal factors.
We will go in-depth into how each of these 10 credit card types function, their pros and cons, eligibility factors, and who can benefit the most from them. Whether you are looking for a card that lets you earn cashback on everyday purchases, fly free on travel expenses, transfer balances interest-free, or build credit from scratch – there is a suitable credit card out there to match your needs.
With credit card debt at an all-time high, it is important now more than ever to find the right card that works for you and aligns with your financial situation. Let’s get started on decoding 10 different kinds of credit cards so you can pick the ideal plastic money for your wallet and reap the maximum rewards! This blog post aims to provide readers with a solid background to make an informed credit card decision for their needs.
• Understand your spending habits and choose a credit card that offers benefits aligned with them – whether cashback, travel rewards, balance transfers, etc.
• Pay off the balance in full each billing cycle to avoid interest charges. Credit cards can be expensive debt if you revolve balances.
• Read the terms and conditions carefully to avail yourself of promotional offers, rewards programs, and other benefits fully.
• Be mindful of annual fees, foreign transaction fees, and penalty APRs while comparing cards. Opt for no annual fee cards if you won’t use the perks enough.
• Having too many credit cards or a very high total credit limit can negatively impact your credit score. Apply judiciously.
• Use cards that offer purchase protection, extended warranty, and other protections to make purchases more secure.
Types Of Credit Cards
1. Cashback Credit Cards
Cashback credit cards offer a specific percentage of cashback on your purchases. For example, you may get 2% cashback on grocery shopping or 3% cashback on dining. Cashback is usually calculated as a percentage of your total spending during a billing cycle. These cards encourage you to spend more to earn higher rewards.
Cashback credit cards are great for those who want to be rewarded for their frequent spending. The cashback earned can be redeemed as cash, statement credits, gift cards, or miles. Some popular cashback cards are the Citi Double Cash Card, Chase Freedom Unlimited, and Capital One SavorOne Cash Rewards Credit Card.
2. Travel Rewards Credit Cards
As the name suggests, travel rewards credit cards offer incentives for travel purchases. They allow you to earn points or miles on travel and accommodation expenses which can be redeemed for hotel stays, flights, and other benefits. These cards may also offer additional travel perks like lounge access, free checked bags, and rental car insurance.
Frequent travelers can greatly benefit from these cards. Some well-known travel rewards cards include Chase Sapphire Preferred, Capital One Venture Rewards, and Bank of America Travel Rewards cards.
3. 0% Intro APR Credit Cards
0% intro APR credit cards come with an attractive 0% introductory annual percentage rate for a limited period – usually between 12 to 21 months. All new purchases and balance transfers are interest-free during this period. You only pay the monthly minimum due. This helps you save on interest charges if you have a large purchase coming up or want to transfer high-interest debt from another card.
Once the intro period is over, a standard purchase APR (typically 12% – 26%) kicks in. Some popular 0% intro APR cards are Citi Simplicity, Wells Fargo Reflect, and Chase Freedom Flex. Use the intro period strategically to pay off debt or make large purchases interest-free.
4. Balance Transfer Credit Cards
Similar to 0% intro APR cards, balance transfer credit cards offer an intro 0% APR for balance transfers for a limited time. You can transfer high-interest credit card debt over to these cards and pay no interest on it for that promotional period. This can help reduce the total interest owed and pay off credit card debt faster.
In addition to intro 0% balance transfer offers, these cards may charge a balance transfer fee between 3% to 5% of the transferred amount. Some balance transfer cards to consider are Citi Diamond Preferred, Wells Fargo Reflect, and Amex EveryDay.
5. Rewards Credit Cards
Rewards credit cards allow cardholders to earn points or miles on purchases which can be redeemed for statement credits, merchandise, gift cards, and more redemption options. The type and rate of rewards earned depend on the category of spending – groceries, gas, dining, travel, etc. Some cards offer very flexible redemption while some limit rewards to cash back only.
Popular rewards credit cards include Chase Freedom Flex, Capital One SavorOne, and Bank of America Customized Cash Rewards credit cards. If you want to earn rewards for spending without focusing on just one category, these cards offer good redemption value.
6. Business Credit Cards
Small business owners can benefit from using a business credit card tailored to their spending needs. Business credit cards help track expenses, provide detailed spending reports, allow employee cards, and offer rewards on business-related purchases. They come with benefits like purchase protection, extended warranties, and rental car insurance for business use.
Some of the most popular business cards are Ink Business Unlimited, Ink Business Cash, and Capital One Spark Cash Plus. They offer cashback on common business spending categories. Business credit cards build business credit history and keep personal and business finances separate.
7. Student Credit Cards
Student credit cards are designed specifically for college students who are new to credit. They tend to have lower credit limits and simpler rewards programs. Many student cards do not require a credit history but may need a co-signer. They help students build credit responsibly.
Using a student card to pay for books, tuition, and other education expenses can help build a strong credit profile for the future. Student cards like Discover It Student Cash Back and Bank of America Travel Rewards for Students offer rewards tailored to college students to start building good credit.
8. Secured Credit Cards
Secured credit cards require a cash deposit or collateral which acts as the credit line for the card. The deposit amount becomes the credit limit. Secured cards are aimed at helping people with no credit or bad credit to eventually qualify for regular unsecured credit cards.
The cardholder still gets a monthly statement and the terms are similar to regular credit cards. By making on-time payments, you can build/rebuild credit with secured cards. Some examples are Discover it Secured, Capital One Secured, and OpenSky Secured Visa.
9. Charge Cards
Charge cards are different from credit cards as they offer no preset spending limit. You are expected to pay the full balance each billing cycle. While there is no credit limit, charge cards have a minimum and maximum spending capacity. Due to no preset limit, charge cards do not impact utilization the same way credit cards do.
American Express is most known for its charge cards. The American Express Green Card and American Express Gold Card are popular charge card options. Charge cards promote disciplined spending as the balance cannot be revolved. They are suited for those with excellent credit and spending power.
10. Retail Credit Cards
Retail credit cards are store-specific cards that can only be used at that particular retailer’s locations. The store credit card incentivizes loyalty by giving rewards points and saving offers redeemable on future store purchases. However, retail cards tend to have higher APRs than traditional credit cards.
Some common retail credit cards are Target RedCard, Amazon Prime Rewards Visa, and Macy’s Credit Card. Retail cards make sense for frequent shoppers at that store. However, it’s prudent not to get too many store cards as having several can negatively impact your credit score.
This covers the main types of credit cards available today and their key differences. Consider the pros and cons of each when picking the right card for your spending habits and financial situation. Having the ideal credit card can provide great benefits like rewards points, interest savings, and building your credit. Always spend responsibly within your means. Use credit cards as financial tools rather than taking on excessive debt when used correctly.