7 Different Types of Credit Cards and How to Use Them
There are many different types of credit cards suitable for various user needs and preferences. If you require a credit card but have found yourself overwhelmed by the number of options, read on to find out which one would be the best fit for you.
In this article, you can learn about various types of credit cards in the US and discover how best to use them.
What Are the Types of Credit Cards?
The seven types of credit cards are:
Plain Vanilla Credit Cards for Users That Seek Simplicity
Standard credit cards, also known as “plain vanilla” credit cards, are cards that are very simple to use. Thus, this credit card type is a perfect option for users looking for a credit card that doesn't come with a massive instruction guide.
They are pretty straightforward, as there are no rewards with complex point systems to consider. They differ from debit cards in that a debit card enables you to handle your own money, while credit cards have a credit limit, allowing you to spend more money than you currently own.
Therefore, a major benefit of credit cards is that you get easy access to a line of credit. You need to, however, pay interest on this credit. Make sure that you pay off your debt each month to avoid penalty APR and other fees.
If you’re constantly late with your credit payments, you might get into a vicious cycle and have high interest rates start to pile up. This could seriously damage your credit score.
Therefore, if you opt for a standard credit card, you should pick one with an interest rate that you can afford.
Secured Credit Cards for People with No Credit Score
If you have no credit score or your score is low, you may have trouble finding a credit card issuer that will issue a credit card to you. However, despite your options being limited, solutions do exist, and this is where secured credit cards come in handy.
It should be noted that, in order to use a secured credit card, you need to pay a security deposit, which usually ranges from $200 to $300. Your limit is, in most cases, going to be the same amount as the deposit.
Making timely debt repayments will help you become eligible for an unsecured credit card, which won’t require a deposit.
Rewards Credit Cards for Frequent Spenders and Travel Enthusiasts
As their name suggests, rewards credit cards offer some kind of reward upon making a purchase. They are perfect for people who like to shop or anyone who would like to save up money while buying essentials. There are three types of rewards credit cards, according to the rewards they provide:
- Cash back rewards card,
- Miles rewards card,
- Points rewards card.
The way cash back rewards cards work is simple - you get a percentage of cash returned to your balance after making certain purchases. The types of purchases you may get some money back from include:
- restaurant food.
For example, if you spend $600 at eligible places with a reward card that offers a 1.5% return, you’ll get $9 back. Although it may sound like a tiny amount for small purchases, cumulatively, you can save up quite a few bucks.
Miles rewards credit cards are perfect for those who frequently travel by air. The way this works is the credit card issuer partners up with an airline and can reward you a specific amount of miles for your airline ticket purchases.
The airline determines how many miles you need in order to board a flight. Although buying one flight ticket won’t do much for you, a miles rewards credit card allows regular flyers to go on free flights and can be quite handy in that respect.
When it comes to point rewards credit cards, instead of getting cash, you acquire points. There are numerous ways you can redeem those points. For example, you can use them to buy a gift card or make a purchase at an online retail store, such as Amazon.
You can make the best of your rewards in a multitude of ways. This includes learning how to use the points, being on the lookout for retention offers, using welcome bonuses, and so on.
Balance Transfer Credit Cards for Those Who Need to Pay Off Debt
Balance transfer credit cards can be an excellent tool for people having trouble paying off debt. That’s because these credit cards usually have a time-limited interest-free offer.
The period without an interest rate usually lasts between 12 and 21 months. A balance transfer credit card allows you to move your debt to that card and start paying it off without any interest, and doing so will help you improve your credit score.
Keep in mind that this kind of credit card might not help you completely clear your debt. Nevertheless, the grace period these cards offer is very beneficial for those paying off large interest rates on their primary loan.
Business Credit Cards for Company Owners
Business credit cards differ from the rest of the credit cards in that they weren’t made for personal use but rather to be used by company owners. They are available for all kinds of businesses, from small startups to large enterprises.
This type of bank card is perfect for companies or company executives who want to have a business account separate from their personal one. There are also various unique benefits that this kind of credit card has to offer. For instance, large bonuses to help support major business expenses.
The downside to this type of debt cards is that some of them don’t include consumer protection. This means that nothing is stopping the bank from suddenly increasing the interest rates, for example.
For that reason, it’s best to check whether the business credit card of your choice includes consumer protection. If not, weigh the risks and decide whether it’s still the best option for you or your company.
Student Credit Cards for Uni Students
For many university students, college years are the first time they’ll start thinking about getting a payment card. Since students usually don’t have a credit score, which makes them ineligible for most kinds of credit, student credit cards are a great option to consider.
This can be their first step toward financial independence from their parents. What’s more, owning a student credit card allows students to build their credit scores. This is essential because a good credit score will enable them to apply for bank loans or other kinds of credit in the future.
Students can choose one of the credit cards for young adults from a selection of different credit card companies. One student credit card example is the Discover it Student Cash Back card. The benefits of this card include:
- No need to have a credit score,
- $20 cash bonus for students with a GPA equal to and above 3.0,
- Low introductory APR rate.
Student credit cards can be especially rewarding to students with excellent grades. Nevertheless, even students who don’t qualify for good grade bonuses can reap the other benefits, which vary from card to card.
Store Credit Cards for Shopaholics
Store credit cards can be an excellent way for shopaholics to save up on their shopping sprees. Namely, to enjoy the benefits of this kind of card, you need to pick your favorite store.
That’s because some stores have teamed up with banks to be able to offer this kind of credit card. You may make your card as soon as you have a specific store offering such deals in mind.
A major perk here is that many stores provide discounts and special offers for those that use their store’s credit card.
You’ll still need to pay off the minimal amount of your credit each month. It should also be noted that, in many cases, the interest rate is higher than in the case of traditional credit cards.
For that reason, you should ensure that the interest rate doesn’t outweigh the benefits you’ll get by using the card.
As you’ve seen in this article, there are many different credit cards on the market. They range from credit cards for businesses to those aimed at students. It’s up to you to choose the type that matches your spending habits, financial status, and preferences.
What are the types of credit cards?
There are many different types, but the major ones include standard, secured, rewards, balance transfer, business, student, and store credit cards. Check out our detailed guide above for more information about each type.
What type of credit card is the best?
There is no simple answer to this question. As was mentioned in our article above, each card is suitable for a specific user profile. When choosing a credit card, think about what you will use it for, what sorts of benefits it offers, and how high its interest rate is.
What is the most common credit card?
Visa is the most common type of credit card by far, making up for almost 53% of all credit cards in circulation in 2023.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
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