Credit Card Types Explained

With different types of credit cards on the market, it is easy to become overwhelmed by the number of choices. Some cards vary based on annual fees, whereas others offer rewards for utilizing them. To browse your card options and choose one that fits your needs, continue reading this blog to learn about the different credit card types.

What Are the Different Credit Card Types?

These are the most common credit card types:

• Balance transfer credit card
• Reward and cash-back credit cards
• Travel credit cards
• Secured credit cards
• Business credit cards
• Student credit cards
• Co-branded credit cards
• Store credit cards

There are some cards that can fall into multiple categories, so it is important to keep this in mind. You may find rewards credit cards, for instance, that are also co-branded, or you may find travel credit cards that are specifically designed for business travel. You will find a breakdown of the various credit card types and how some of them can be merged together.

Balance Transfer Credit Cards

Balance transfer credit cards are designed to consolidate debt and save you money by transferring outstanding balances to one card. That’s why most balance transfer cards offer a 0% introductory annual percentage rate (APR) for several months, with some even extending the period to 24 months. 

Once the 0% interest period finishes, the cardholder will be charged interest at the card’s standard rate. Based on your creditworthiness, the APR may range between 17% to 28%.

However, these cards typically charge a fee of 3% to 5% on the total amount that is transferred. 

The most popular balance transfer credit cards include:

• Wells Fargo Reflect Card: this offers 0% intro APR for up to 21 months and a 3% balance transfer fee. After the introductory period ends, the APR ranges between 16.74% and 28.74%.
• Discover it Balance Transfer: offers 0% intro APR for 18 months and a 3% balance transfer fee. After the intro APR expires, the interest will range from 14.99% to 25.99%.
• Citi Diamond Preferred Card: offers 0% intro APR for 21 months and a 5% balance transfer fee. After 21 months, the APR ranges between 16.74% and 27.49%.

Travel Credit Cards

Most credit card issuers charge a non-sterling transaction fee of around 3% when you use your card abroad. Travelers making purchases in foreign currencies are charged these extra fees to offset the exchange rates.   

This is where travel credit cards come to solve this problem. These credit card types are best used abroad or in another currency, as you won’t be charged an additional fee. In addition, travel credit cards also offer the opportunity to earn rewards like credit card points that you can transfer to hotel and airline programs to make your trip more affordable. However, the APR on these cards can range from 19% to 34%.

Top travel credit cards include the following:

• Capital One Venture Rewards Credit Card: allows users to receive unlimited double miles on all purchases and five times the miles on rental cars and hotels booked through its booking platform. The credit card has an annual fee of $95, and the APR ranges between 18.99% and 27.99%.
• Chase Sapphire Preferred Card: allows travelers to earn five times the points on travel acquired through Chase Ultimate Rewards, triple on dining, and double on all other travel purchases. This card also has an annual fee of $95. The APR varies from 18.99% to 25.99%.
• Chase Freedom Unlimited: allows users to earn 6.5% cash-back on travel bought through Chase Ultimate Rewards, 4.5% on drugstore purchases and dining at restaurants, and 3% on all other purchases. Chase Freedom Unlimited has no annual fee, and the APR ranges from 17.99% to 26.74%.

In addition, you could also end up spending less and earning more with your travel credit card by considering the cheapest European countries to visit.

Reward and Cash-Back Credit Cards

Reward and cash-back credit cards give users points on a percentage of their spending that they can redeem against goods and services like groceries, gas, dining out, and travel rewards. Many cash-back and reward credit cards come with zero annual fees. 

However, some cards with more generous bonus offers and rewards schemes charge a modest yearly fee, usually under $100. 

Nonetheless, the standard cash-back rate typically ranges from 0.25% to 2% of your spending.

Some of the most popular reward and cash-back credit cards include:

• Capital One Venture Rewards Credit Card: allows users to earn unlimited double miles on all purchases and five times the miles on rental cars and hotels booked through Capital One Travel. It has a $95 annual fee. 
• Chase Freedom Unlimited: allows users to enjoy 6.5% cash-back on travel bought through Chase Ultimate Rewards. Additionally, cardholders get 4.5% back on drugstore purchases and dining at restaurants and 3% on all other purchases. This card does not charge an annual fee. 
• Wells Fargo Active Cash Card: allows users to earn unlimited 2% cash rewards on all purchases with no annual fee.

Secured Credit Cards

Most credit cards are unsecured, meaning they don’t require collateral to use the funds. On the other hand, secured credit cards require cardholders to put down a cash deposit to secure a small line of credit. 

Unsecured credit cards are designed for first-time users who don’t have credit scores or want to build their poor credit scores. One-time security deposits can be as low as $49. However, the cardholder’s credit limit usually matches the security deposit amount. In addition, if the credit card user falls behind on their payments, the issuer may keep the deposit.

While secured cards may sometimes have high fees and interest rates, some options offer rewards and don’t have an annual fee. Here is a list of the most utilized secured credit cards:

• Discover it Secured Credit Card: comes with 25.99% variable APR and zero annual fees. The minimum deposit amount is $200.
• OpenSky Secured Visa Credit Card: comes with 20.39% variable APR and a $35 annual fee. The minimum deposit amount is also $200.
• Capital One Platinum Secured Credit Card: comes with 28.49% variable APR and zero annual fees. The minimum deposit amount is $49.

Business Credit Cards

Business credit cards are designed to separate personal and business expenses while allowing entrepreneurs to earn rewards on all their business spending. Business credit cards share the characteristics of cash-back, reward, travel, and secured credit cards. 

Most credit cards have 0% introductory APR. After that, the APR varies from 16% to 27%, depending on your credit score and history. In addition, the credit limit is based on each applicant’s creditworthiness. 

To qualify for a business credit card, you must present proof of business operations, tax IDs, legal structure, and revenue. Some business credit cards to look out for include:

• American Express Blue Business Cash Card: cardholders can earn 2% cash back on all eligible purchases of up to $50,000 per calendar year with zero annual fees.
• Ink Business Cash Credit Card: business owners can receive 5% cash back on the first $25,000 spent on office supplies, Internet, cable, and phone services. Additionally, they earn 2% cash back at gas stations and restaurants and 1% on all other card purchases.
• Capital One Spark Miles for Business: users can earn unlimited double miles per dollar on every purchase. Also, they make a one-time bonus of 50,000 miles if $4,500 are spent within the first three months of opening the account.

Co-Branded Credit Cards

Co-branded credit cards are a mutual partnership between a particular merchant and a credit card issuer. These cards provide merchant-specific benefits to brand-loyal consumers, including airline credit cards that let customers earn miles within a frequent flyer program.

Examples of co-branded credit cards include the following:

• Southwest Rapid Rewards Priority Credit Card: users can earn unlimited flying points on all purchases.
• Delta SkyMiles Platinum American Express Card: allows travelers to earn triple miles on Delta purchases and hotel purchases, double miles on dining and groceries, and one mile per dollar on all other purchases.
• Hilton Honors American Express Card: cardholders can earn twelve times the points on hotels and resorts in the Hilton portfolio and six times the points on dining, groceries, and gas.

Student Credit Cards

Student credit cards are geared toward young adults with a limited credit history. This credit card type doesn’t typically charge an annual fee and offers bonus perks for students with good grades and rewards for each purchase. Hence, if used responsibly, this card can be an excellent option for young students who want to establish credit while in school.

Some popular student credit cards are the following:

• Capital One SavorOne Student Cash Rewards Credit Cards: students can earn 3% cash back on dining, entertainment, and grocery stores and 1% on all other purchases. 
• Discover it Student Cash Back: offers students 5% cash back on everyday purchases, including grocery stores, restaurants, and gas stations, and unlimited cash-back match.
• Chase Freedom Student credit card: allows students to earn 1% cash back on all purchases.  And students can earn a $50 bonus after the first purchase within the first three months of opening the account.

Store Credit Cards

Store credit cards are offered through retail stores, allowing customers to charge their purchases and pay them back in installments. Store credit cards are typically only used within one specific store. However, some can be used within a particular chain of stores. 

This credit card type typically comes with a higher interest rate, around 25%. Nonetheless, you may benefit from the reward programs if you pay off your loan on time.  

Here are some popular store credit cards:

• Amazon Prime Rewards Visa Signature Card: allows cardholders to get 5% cash back on all Amazon.com and Whole Foods purchases; 2% at restaurants, gas stations, and drugstores; and 1% back on all other purchases for zero annual fees.
• Costco Anywhere Visa Card by Citi: allows customers to get 4% cash back on eligible gas and electric vehicle charging purchases, 3% cash back on restaurants and travel, 2% cash back on all Costco purchases, and 1% cash back on all other purchases for no annual fee.
• Capital One Walmart Rewards Mastercard: shoppers can earn 5% cash back on Walmart.com and Walmart app purchases; 2% for in-store purchases, travel, and restaurants; and 1% back on all other purchases for no annual fee.

Sum Up

There are many types of credit cards available, each designed to meet specific needs. So, depending on your needs and lifestyle, you will likely find the credit card type that suits your interest and requirements. For instance, if you want to build your credit as a student, you may want to look into a student credit card. On the other hand, if you’re a business owner and want to separate your personal finances from your business expenses, you may consider getting a business credit card to facilitate your daily expenditures.