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The most common types of credit cards are rewards credit cards and cashback credit cards, but the best type of credit card is dependent on the person who opens it—whether they want travel points, have business expenses or are trying to build credit for the first time.
Whether you’re a seasoned cardholder or a first-timer, you may be surprised at how many types of credit cards are available for you to choose from. Depending on your credit score and the length of your credit history, you may not be able to qualify for the ones with the most favorable terms and lowest interest rates. But chances are there’s a card that fits your needs and may help you build credit if you use it responsibly.
Here, we’ll break down each category, discuss the specific card types and explain each one’s unique benefits so that you can get the most out of your card.
Keep reading to learn everything you need to know about the different types of credit cards, or jump to the section that interests you the most.
Table of contents
- Secured vs. unsecured credit cards
- Credit cards that help build credit
- Starter credit cards
- Student credit cards
- Joint credit cards
- 0 percent APR credit cards
- Credit cards with no annual fee
- Balance transfer credit cards
- Business credit cards
- Rewards credit cards
- Cashback credit cards
- Retail credit cards
- Travel credit cards
- Hotel credit cards
- Airline credit cards
- Gas rewards credit cards
- Charge cards
- Prepaid cards
1. Secured vs. unsecured credit cards
Most credit cards are unsecured. This means that you are not required to put up a security deposit to start using credit.
Secured cards, on the other hand, require an up-front payment to act as collateral in the event that you can’t pay your balance. Credit card issuers see borrowers with bad credit scores as riskier, so this deposit helps mitigate some of that risk.
Benefits of unsecured credit cards:
- Lower interest rates and fees
- No deposit needed
Example of an unsecured credit card: Citi® Double Cash Card
Benefits of secured credit cards:
- Help people with bad credit
- Can strengthen credit over time
Example of a secured credit card: Capital One® Secured Mastercard®
2. Credit cards that help build credit
If you’re new to the world of credit, you may be wondering how to build credit quickly without going into debt. If you’re in college, you may have the added load of student debt.
When you’re just starting out, it’s important to manage your credit card carefully to start your credit health on the right foot. You may even be able to earn some rewards along the way. Just be careful of predatory loans and high interest rates.
Benefits of credit cards that help build credit:
- Have at least a $300 starting credit limit
- Sometimes don’t require a credit score
Example: Citi® Secured Mastercard®
3. Starter credit cards
Those who have little to no credit may find starter credit cards helpful for their credit journey. Consider getting one if you’ve never had a line of credit, or if you have one that hasn’t been open for very long.
These cards typically don’t offer great rewards programs or cashback incentives, and they come with high interest rates. However, if you can find one with no annual fees, it can be a great option to begin building credit.
Benefits of starter credit cards:
- Establish your credit
- Build a solid payment history
- Easy to qualify for
Example: Capital One Platinum® Credit Card
4. Student credit cards
Student credit cards operate exactly the same as standard credit cards. The main difference is that their total credit limits are usually lower. Additionally, since they are marketed toward students who likely don’t have much credit history, the requirements for approval are more lenient.
Benefits of student credit cards:
- Sometimes offer incentives for good grades and GPA rewards
- Earn cashback and rewards on everyday purchases
- Sometimes have no annual fee
Example: Discover it® Student Cash Back Card
5. Joint credit cards
Joint credit cards require two parties to apply together to start credit, and they are both equally responsible for paying off the balance. Therefore, late or missed payments may ding both credit scores—while consistent, on-time payments will benefit both scores.
Benefits of joint credit cards:
- May help you or your partner get approved if one of you has poor credit
- Can help you or your loved one build credit
Example: Bank of America® Cash Rewards Credit Card
6. 0 percent APR credit cards
Sometimes, applying for a low-interest credit card is a strategic move. Maybe you want to transfer your balance to a card with a lower interest rate, avoid paying interest for an introductory period or customize features for your business.
Sometimes cards will offer temporarily lower APRs for an introductory period. Cards that boast 0 percent APR don’t require you to pay interest on new purchases for a set amount of time, usually about 12 months.
Benefits of 0 percent APR credit cards:
- Can save money on interest by borrowing money for free
- Easier to pay off big purchases
Example: U.S. Bank Visa® Platinum Card
7. Credit cards with no annual fee
Many credit cards charge annual fees for the convenience of having the card and for the benefits and rewards they offer. Depending on how elite the card is, these fees can be up to $450 or more.
However, many cards offer no annual fee, and these still come with decent cashback programs. Scan your credit card offer or the terms and conditions to make sure your card has no annual fee.
Benefits of credit cards with no annual fees:
- Can save an average of $58 each year
- Bonus points geared toward general spending
Example: Citi® Double Cash Card
8. Balance transfer credit cards
Similar to 0 percent purchase APR credit cards, balance transfer cards offer temporarily low introductory rates—but specifically for balance transfers.
This is a great credit card option for those who want to save money on a high-interest credit card. Rather than closing the unfavorable card—which may lower your credit score—a balance transfer may be the better option.
Benefits of transfer credit cards:
- Can avoid paying lots of interest
- Can instantly move debt to a new account
- Can help pay off high interest charges
Example: Wells Fargo Platinum Card
9. Business credit cards
If you’re a business owner, you may want to apply for a credit card specifically for business use. This will separate personal and business expenses, and the rewards may help your business save money.
You’ll then begin to build business credit. To apply, you’ll need decent credit and either a federal tax ID or employer identification number (EIN).
Benefits of business credit cards:
- Higher credit limits
- Expense management reports
- Can add more cards for employees
Example: Costco Anywhere Visa® Business Card by Citi
10. Rewards credit cards
In order to get the most out of their spending, most cardholders gravitate toward credit options that offer specific rewards.
These types of credit cards are great for people who are experienced with credit cards and can pay off their monthly balances in full. It’s best to be careful with rewards credit cards because the interest charges are typically high.
Benefits of rewards credit cards:
- Can earn rewards based on spending habits
- Options tailored to specific needs and retailers
Example: Chase Sapphire Preferred®
11. Cashback credit cards
These credit cards allow you to earn a cashback reward percentage—typically ranging from 1 to 5—every time you make a purchase with the card. Some issuers will pay this amount annually, while others pay monthly.
There are four main kinds of cashback credit cards:
- Flat rate: You will get a predetermined amount of cash back on every purchase, regardless of category.
- Rotating bonus: These cashback credit cards change their rewards every quarter based on the industry—from gas stations and grocery stores to retailers and travel companies.
- Tiered bonus: These cards fluctuate on cashback rewards, depending on what you used your credit card for.
- Custom bonus: With this kind of cashback credit card, you will choose the spending category that you want extra cashback bonuses on.
Benefits of cashback credit cards:
- Can customize where you get your cash back
- No introductory APR
- Signup bonuses and constant rewards
Example: Chase Freedom Unlimited®
12. Retail credit cards
Specific businesses will offer retail credit cards, also known as store credit cards, that a customer may only use to make purchases with that store. While these cards aren’t ideal for everyday purchasing needs, they’re a great way to earn generous rewards with stores that you frequently shop at.
There are over 300 store credit cards available, from Walmart and Target to Lowe’s and JCPenney.
Benefits of retail credit cards:
- Typically have no annual fees
- Excellent credit not required
- Offer substantial first-purchase discounts
- Long-term cashback rewards
Example: Amazon Prime Store Card
13. Travel credit cards
Earning rewards while traveling to far-off destinations sounds like a win-win. That’s why travel credit cards are one of the most popular types of credit cards for people of all experience levels.
These credit cards offer rewards via travel-based purchases. These rewards can be anything from free hotel stays to airport perks and flyer miles. Some travel credit cards even offer rewards on everyday spending.
Benefits of travel credit cards:
- Can earn rewards using vacation purchases
- Can help make your future trips affordable via points systems
Example: Bank of America® Travel Rewards Credit Card
14. Hotel credit cards
Hotel credit cards are affiliated with a specific hotel chain and offer rewards from accumulated points. These companies will offer some points for purchases made at unrelated businesses like grocery stores, gas stations and restaurants. But the main attraction is the bonus points you will earn on eligible purchases made directly with the hotel, like nightly stays.
Benefits of hotel credit cards:
- Generous signup bonuses
- Rewards when you spend money on hotel bookings
- Free stays annually
Example: Hilton Honors American Express Surpass® Card
15. Airline credit cards
Certain credit cards offer rewards on purchases made with a specific airline, while others allow you to earn rewards with any airline or travel-related expense. These rewards rack up in the form of miles. For example, many cards offer two miles for every one dollar spent on flights.
Benefits of airline credit cards:
- Great way to score free and discounted flights
- Airport perks like TSA precheck, lounges and upgrades
Example: Delta SkyMiles® Gold American Express Card
16. Gas rewards credit cards
Not to be confused with gas station credit cards that operate like retail cards, a gas station rewards card offers cash back when you pay at the pump. It can be used anywhere, but you’ll enjoy bonus rewards at gas stations.
Benefits of gas rewards credit cards:
- Up to 3 – 5 percent cash back on gas purchases
- Often has no annual fee
- 0 percent introductory APR
Example: PenFed Platinum Rewards Visa Signature® Card
17. Charge credit cards
Charge cards operate in exactly the same manner as regular credit cards, except for one major caveat: you must completely pay off the total balance each month. Failure to do so results in late fees and penalties and will likely cause a drop in your credit score. On the flip side, they typically come with sizable initial bonuses and rewards.
Benefits of charge cards:
- Higher credit limits
- Generous points systems
- Up to five points per one dollar spent
Example: The Platinum Card® from American Express
18. Prepaid cards
Prepaid cards aren’t technically credit cards because they don’t involve borrowing money. Instead, a cardholder loads a set amount of money onto the card, and purchases come out of the card’s balance, similar to a gift card. The spending limit then renews if and when the card is reloaded.
Benefits of prepaid cards:
- Can help you stay within a budget and avoid getting into credit card debt
Example: American Express Serve® FREE Reloads
What type of credit card is best?
Ultimately, the decision for which card to get is up to your personal preferences and financial goals. However, there are a few good rules of thumb when looking for the best credit card for you.
Remember to read the terms and conditions carefully before signing up for any credit card. Generally, cards with any of the following perks may be worth pursuing:
- 0 percent introductory APR
- Low APR after the introductory period
- Signup bonus
- Solid rewards or cashback program
- No annual fee
The different types of credit cards may seem daunting at first, but once you understand the unique benefits of each one, you’ll be able to find a card that fits your needs. Remember that—regardless of credit card type—managing your credit well is the key to keeping your credit healthy.
After years of on-time payments, low credit utilization, a good mix of credit and few hard inquiries, you’ll likely be well on your way to healthy credit. To learn more about your credit, sign up for a free credit report assessment with Lexington Law today.
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