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.
These are the most common credit card types:
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 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:
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:
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 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:
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:
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:
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:
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:
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:
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.