Applying for a credit card can be a big step, but which one do you pick?
Multiple card types exist because different groups of people have different needs.
Credit cards are a convenient, simple tool that offers a higher degree of safety when transferring money. Additionally, they help establish and build your credit score, which is crucial in taking out a mortgage, getting student loans, or buying a vehicle.
That said, read on to learn about the different credit card types, their benefits, and which one may be best suited to your needs.
Types of credit cards
Described below are 11 of the most popular types of credit cards.
Rewards credit cards
As a rewards cardholder, you receive benefits, typically in the form of points based on the percentage of your spending. You're able to redeem these points in multiple ways, such as through gift cards, discounts on merchandise, and sometimes they can go toward your credit statement.
Using this type of card can be very beneficial for your daily spending. You have payments you must make regardless, and frequent use will help you build up rewards quickly. On the other hand, this can lead to overspending, too.
Premium rewards cards
Premium rewards are typically for individuals with excellent credit history and high credit scores who have demonstrated timely repayment habits.
The benefits earned from this card are "luxury rewards." For example, you can potentially earn up to 150,000 points if you spend more than $5,000, whereas a traditional rewards card may only offer a 1–5 percent cash-back rate on every purchase.
These cards may come with steep interest and annual fees, however.
Cash-back credit cards
This type of rewards card allows you to earn cash-back with every purchase you make. The amount of cash-back varies from card to card, however.
Some cards offer a flat rewards rate, while others provide bonus cash-back and points on specific purchases like dining or travel.
Most cash-back cards come with no annual fees.
Travel credit cards
Another type of rewards card, these offer advantages that specifically cater to traveling. Travel rewards can include airline miles, hotel discounts, or even access to a frequent flyer program and VIP airport lounges.
This card is best for those who travel frequently, whether for business or pleasure.
Typically, you do not have to make purchases exclusively related to travel to earn rewards. You can simply spend your money on everyday things.
Balance transfer credit cards
A balance transfer card allows you an introductory period with zero APR (annual percentage rate) or zero interest. This period usually lasts 15 to 21 months. Once it ends, you are required to start paying interest.
Delayed interest payments can be very beneficial, allowing you to focus on paying off other outstanding debts.
Some — but not all — balance transfer cards require an upfront deposit and a 3–5 percent fee on the transfer amount.
In the end, balance transfer cards don’t offer flashy rewards, but they are a tool to consider if you want to repay any outstanding loans or debts quicker. Unfortunately, you'll need a decent credit score to qualify for this type of card.
Retail credit cards
There are two classifications of retail cards: closed-loop and open-loop cards. The former is associated with a specific retailer and is only redeemable at that store. Shops that have a relationship with a major credit card issuer like Visa or Mastercard are the ones that issue open-loop cards. They are for general purposes and accepted at a variety of locations.
The primary purpose is to encourage customers to shop at specific stores with rewards and deals.
Retail cards can come in the form of debit cards, gift cards, or prepaid cards.
0% intro APR card
Unlike balance transfer cards, zero APR cards offer an interest-free period of approximately 18 months. Afterward, the interest rate will climb, depending on your creditworthiness.
If you're looking to make a relatively large purchase soon and don't want to worry about paying interest on it, this may be the card for you. But it is important to note that this is only the case so long as you can indeed pay off that purchase before the introductory period ends.
You also need a relatively good credit score to obtain this type of card.
Unsecured credit cards
Most credit cards are unsecured, meaning you do not have to pay any collateral before receiving the actual card. Unsecured credit cards most commonly go to individuals with very good or excellent credit.
Secured credit cards
These are the opposite of unsecured credit cards and require an initial deposit. The line of credit you receive typically equals the amount of your deposit.
Secured cards are relatively easy to obtain, as you don’t need a high credit score to be approved. Therefore, they can help build your credit history if you have none, or they can help fix your credit if it is not ideal.
Deposits are refundable if you choose to close the account, so long as you pay off your current balance.
Business credit cards
Business credit cards allow individuals to keep personal and professional expenses separate. Business-based purchases earn cardholders rewards like cash-back and travel credits.
Don't let the name confuse you, however. You don’t need a business to apply for this type of card.
Point Card
Last but not least, there's Point Card.
Designed as an alternative to an ordinary credit card, Point Card is a straightforward tool that offers transparency and a high degree of independence to cardholders. Not only does Point provide you with a means to spend your own money in whatever capacity you like, but you'll also receive exclusive benefits like unlimited cash-back on all purchases.
While the other cards described in this article offer only one or two perks, Point offers no interest fees, fraud protection with zero liability, travel perks, and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shops.
Put simply, Point is an excellent, well-rounded tool to help you navigate your financial journey intelligently.
The bottom line
Ultimately, the right type of credit card for you is dependent on your personal preferences and lifestyle. There is no such thing as "the perfect credit card." Each has its advantages and disadvantages, so always be sure to do your research before deciding. Remember, every time you submit a credit card application, a note is written and added to your credit history. Multiple inquiries, especially within a brief period, can harm your credit score.
Made to spend.
