Last Updated: June 19, 2022
Credit cards are a convenient way of borrowing money. You can use them to make a purchase on credit, build a credit score or improve your personal finances. However, if you’re not careful, you can easily accumulate a lot of debt.
Here, you’ll be able to learn a thing or two about the many different types of credit cards and how to pick the best credit card for your needs. You’ll also learn what to look out for if you want to get a credit card and how to use it to get the most bang for your buck.
Most Common Types of Credit Cards
Before you apply for a credit card, here are a few things you should know. First, there are many credit card options, and you should do your research. Second, the best credit cards for your friends might not be the best ones for you. Third, consider your credit score, the reason you want the card, and credit card rates.
Here are the most common types of credit cards explained and how to get the most out of them.
Standard credit cards (unsecured)
The standard unsecured credit card is the most common type of card. It doesn’t require a deposit for approval, and it’s available to people with a good and excellent credit score. This is one of the simplest credit card types.
The card has a revolving balance — and when you make a purchase, you use some of the balance. Every month you have to pay a minimum charge until you pay off the purchase. If you don’t pay the charge by a certain due date, there is a financial charge for the outstanding balance.
Normally these cards have a variable APR between 11.99% and 25.99%. If you get a good deal, there might be a signup bonus in the range of $200–$500. Annual fees range between $0–$99.
Rewards credit cards (cashback)
The purpose of a reward credit card is the collection of rewards for each purchase or for certain purchase categories. You can get points to spend in-store, redeem as cash, or use as travel points.
Travel points are one of the most popular awards among frequent travelers because you can get free travel, free hotel stays, or other travel perks. The best credit cards with rewards give you up to 6% cash back, have no annual fees, and a sign-up bonus.
Unlike some others, with this credit card, for example, you need to have a good or excellent credit history. However, you can still find good offers for people with fair, limited, and bad credit. The APR falls within the normal percentage range, with some card issuers offering sign-up bonuses and 0% intro APR.
This type of card must match your lifestyle; otherwise, you’ll see no difference compared to the standard unsecured credit card.
If you’re interested in these card types, here are the credit cards that will earn you the most cashback in 2021.
Credit cards with 0% intro APR
Paying less interest is always a good thing. Cards with 0% introductory APR will give you enough time to pay off a large purchase or accumulated credit card debt without paying interest.
Balance transfer cards
Balance transfer credit cards allow you to move your balance from one credit card to another.
Now, let’s say you’re not new to credit cards and have some debt you’re looking to get rid of faster and with lower interest. With 0% intro APR, a balance transfer card can save you thousands of dollars in interest payments. For this reason, this is the best type of credit card to get when getting out of debt.
If you have debt spread across multiple cards, you can transfer all of it into one place, which will eliminate the inconvenience of making multiple monthly payments.
Initially, applying for a new credit card may hurt your credit score. However, now you have lower interest, possible new lower payment requirements, and you no longer have to worry about making multiple payments. Over time, this will decrease your utilization rate and show that you’re responsible and have good spending habits, which will improve your credit score.
Cards with 0% intro APR for purchases
When looking at credit card options, a card with 0% intro APR is great for purchases without interest and might offer a nice advantage over comparable loans. They are a very good resource as long as you intend to pay off the balance within the no-interest period.
The APR will increase after the intro period, so be mindful of the post 0% intro period APR. Typically the intro period lasts from 6 to 18 months. After that, the interest could increase from 11.99% up to 25.49%.
Different credit card companies offer different options. Here are some of the best zero interest credit cards for 2021.
Business credit cards
These credit card types are designed specifically for small businesses. If you’re a small business owner, they are a great tool for separating personal finance from business finance. This card type functions in the same way as consumer credit cards. When applying for a business card, your personal credit score will be reviewed.
Small business owners rely on these card types because many of them come with tracking and reporting features. Some have rewards that are useful when making large purchases like office supplies. If you use them to make large purchases each month, you can generate large rewards. Mostly they are very useful for increasing the cash flow of your business.
Cards for people with bad or no credit
If you don’t have a credit score yet, or if you damaged it, but still need credit, you still have a few credit card options.
Secured credit cards
If your credit score is damaged or you don’t have one yet, secured credit cards are an alternative you could consider.
To get this card, you need to make a deposit. The credit limit on your card will be equal to the amount of the deposit you make. For example, if you have a $200 deposit, your limit will be $200. There are multiple ways to finance this deposit, including cash, checking account, or money order. This deposit is a secured card’s credit line, and almost all companies will give you a full refund if you decide to close the card without an outstanding balance.
Typically they have a higher APR than other credit card types. Most often, there are no rewards or cashback, though some credit card companies will offer points for things like groceries or gas.
This card type can help you rebuild your credit score, and some of them are upgradable to a standard credit card after your credit score has been repaired.
Credit cards for students
These cards are designed specifically for students. Since most young adults don’t have any credit history, this is one of the few ways to start building it during one’s college days. A student credit card will help you build your credit score, give you rewards, and help set you up for any future loans you might wish to take. Fortunately, there are plenty of different cards available to help you do just that. Of course, managing your finances responsibly is always advised.
Generally, you need to be 18 or older to get a credit card in your own name. But if you don’t have a steady income, you might need a co-signer.
Store credit cards
If you enjoy shopping at a particular store or retail chain, you might find that their credit card works great for you. A store credit card is a limited-purpose credit card. With it, you can get rewards and store discounts for purchases made at their stores.
They are easy to get and usually come with sign-up bonuses. However, be mindful because they normally have high interest rates, with some going over the 30% point. Annual fees are mostly in the normal range.
Charge credit cards
Charge cards work differently than standard credit cards. They often have no pre-set limit or a much higher limit than other credit cards. The balance spent on the credit cards must be paid in full by the end of the month. Normally, there’s no interest if you pay off the balance by the due date. Some providers offer to spread out the balance payments over a longer period but apply some form of interest.
Almost all charge cards have an annual fee, but they also have a good reward system. To apply for a charge card, you need a good or excellent credit score.
What Type of Credit Card Should I Get?
Consider the reason why you are getting a card.
A standard credit card is the most common type of credit card. This is the simplest card type, and many people use it. If you have a good or excellent credit score, then you are a great candidate for this one.
Are you a young adult, student, or a young professional just starting? Then you should consider student credit cards or our selection of the best credit cards for young adults. They are specially made for young people, taking into account that they usually don’t have a credit score and need to build one.
If you’re in debt, looking to get out, then consider a balance transfer card. This is a good way to simplify things so you can get out of debt, and you might save some money in fees.
If you’re not in debt but have a damaged credit score, then maybe the best option is a secured credit card or a credit-builder card. These types of cards do require a deposit, but they make it harder to get into debt by spending a lot of money. Take a look at the credit cards for people with bad credit we reviewed for you.
Do you travel a lot? Or like to shop at a particular retail chain? Are you interested in collecting rewards? Consider a reward card! There are plenty of great reward cards to consider. And for those who are fans of a store and make big purchases there, a store credit card might be a good fit for you.
Taking into consideration the many different credit cards, paying less interest is always a good thing. Credit cards with 0% intro APR offer many advantages: you can use them to pay off high interest credit card debt or make a large purchase and pay it off with no interest during the intro period.
Finally, there is a special category of credit cards for business owners. Business credit cards are a great way to separate your finance, earn points, and track expenses using tools designed for that purpose.
There are many different types of credit cards, and they all have different purposes and intended customers. If used wisely, they can be great tools that can help you improve your personal finances. While having one is practically necessary to build one’s credit history, the misuse of credit cards has led to a large amount of credit card debt. Being responsible and managing your finances properly is crucial.
First, take a look at your lifestyle and your credit score. The reason why you want a credit card is a crucial step.
Ask yourself a few questions. Is this your first credit card? Do you need to make a big purchase? Are you building credit? Do you travel a lot/have loyalty to a certain retailer? Are you just improving your financial situation? This will help narrow down the type of card you need.
Once you have done that, take a look at the companies that offer those types of cards. Choose one with the lowest APR and lowest annual fees that you qualify for.
The card that suits you the most will meet your needs without being a financial black hole.
There are many different types of credit cards aimed at different types of customers. For people with bad or damaged ratings, you have balance transfer cards and secured credit cards. Specialized cards are available for young adults and students. Some retailers have their own store cards, and travelers often seek out rewards cards that award travel miles. And finally, some people just need a regular, no-frills standard credit card.
Choosing between the various types of credit cards can be quite the task. But here are a few good rules to keep in mind. If you are in debt and looking to get out, a balance transfer card is what you should choose. Those collecting rewards should look into cashback (reward) credit cards. For people with damaged or no credit, look into credit cards for young adults or secured credit cards.
There are plenty of types of credit cards to choose from. And the best one for you depends entirely on what you are going to use it for.