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There are so many credit cards out there that it can be hard to figure out which one is best for you. Before you choose a credit card, it is helpful to know about the different kinds that are out there.
All that counts is that you choose the best one for your needs. And there are a few options, some of which are simpler than others.
So, how do you decide which credit card is best? Read on to learn about the different kinds of credit cards and determine which one might be best for you
1. Rewards Credit Cards
A rewards credit card functions similarly to any other credit card, allowing you to earn money back as you spend. Typically, this takes the form of either reward points or Cashback. Using a credit card with rewards to pay for groceries and household items, you can get cash back or travel tips for something you would buy anyway.
For example, your rewards can be redeemed for airline miles, hotel or vacation credits, or savings on rental cars. Your card may give cash back deposited directly into your account as you shop.
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Pros
- Every time you spend, you collect points, which you can use for discounts and Cashback.
- Points can be redeemed for travel, statement credits, and online shopping.
- Some credit cards with rewards come with travel accident insurance, insurance for car rentals, emergency cards, cash replacement, and more.
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Cons
- The primary disadvantage of reward credit cards is their high-interest fees.
- You might be inclined to spend more than you can afford to maximize your incentives.
- One of the most significant disadvantages is that most reward cards come with a substantial annual charge.
2. Travel Credit Cards
You might consider a credit card with travel rewards if you travel frequently. When you make purchases with a travel credit card, you might earn rewards that can be used in various travel-related ways.
A credit card with travel rewards may also allow you to earn points on non-travel-related purchases. For instance, certain reward cards for travel could provide the same reward percentage for all transactions. For purchases made for travel, certain companies may give a more significant reward percentage.
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Pros
- For regular travelers, travel reward categories may be pretty alluring—and simple to utilize.
- Anyone traveling frequently (or sometimes) might appreciate benefits like lounges or elite status with a particular airline or hotel.
- Relatively flexible rewards cards give cardholders a range of redemption possibilities for their hard-earned points.
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Cons
- Some luxury travel credit cards for travel have significant yearly fees.
- You shouldn't get a travel credit card if you don't travel.
- Even with premium cards, most travel credit cards demand a decent to outstanding credit score.
Card | Rewards | Bonus | Annual Fee |
| Chase Sapphire Preferred® Card | 2X – 5X
5x total points on travel purchased through Chase Travel, 3x points on dining, online grocery purchases and select streaming services. 2x on other travel purchases. Plus, earn 1 point per dollar spent on all other purchases.
| 60,000 points
60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening
| $95
|
|---|---|---|---|---|---|
| Capital One Venture X Rewards | 1X – 10X
10 miles per dollar on hotels and rental cars when booking via Capital One Travel, 5 miles per dollar on flights and 2 miles per dollar on all eligible purchases
| 75,000 miles
75,000 bonus miles once you spend $4,000 on purchases within the first 3 months from account opening
| $395 | |
| Chase Sapphire Reserve® | 1X – 10X
5X total points on air travel and 10X total points on hotels, car rentals and dining when you purchase through Chase Ultimate Rewards®, immediately after earning your $300 annual travel credit. Also, earn 3x points on dining at restaurants and travel (after meeting the $300 travel credit), then 1x points per dollar spent on all other purchases. | 60,000 points
60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening
| $550 | |
| The Platinum Card® from American Express | 1X – 5X
5X points on up to $500,000 spent on directly-booked airfare and flights and prepaid hotels booked through American Express Travel (per calendar year), 2X points on prepaid car rentals through American Express Travel and 1X points on all other purchases
| 80,000 points
80,000 Membership Rewards® points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership
| $695 (Rates & Fees) |
3. Balance Transfer Credit Cards
Even though many credit cards allow you to make balance transfers, a balance transfer credit card provides an attractive introductory rate on balance transfers for a limited time. Moving debt from one credit card to another might be beneficial to reduce the interest paid on a large balance.
There is a wide range of balance transfer interest rates, with some offering 0% interest on balance transfers. However, even 0% interest rates typically come with conditions, such as a transfer fee.
A credit card company might provide a reduced promotional rate for a more extended period to increase its appeal. You will usually need to have decent credit, though, to get approved. Here are the main pros & cons of balance transfer cards:
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Pros
- 0% balance transfer credit cards offer a 0% intro APR. This 0% interest period lets you carry debt without paying interest.
- While a balance transfer may hurt your credit score in the near term, it may improve your score over time.
- Consolidating your previous debt into a single payment is one of the benefits of using a balance transfer card.
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Cons
- If you have a large amount of debt and are using a lot of your credit, you might not be able to get many balance transfer cards.
- Most credit cards impose a fee when you transfer the debt to your card. A percentage of the transferred amount is used to calculate the charge.
- After moving your balance to a new credit card, you might be tempted to keep spending and get deeper into debt.
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4. Secured Credit Cards
Most credit cards are unsecured, which means you are not required to put up any security. On the other hand, with secured credit cards, you must make a cash deposit to obtain a modest line of credit, typically for a comparable amount. Your approval odds with such as card are higher.
A secured credit card's credit limit usually equals the deposit paid on the card. However, it may be higher in specific circumstances, such as when there has been a significant default, such as missing a mortgage payment. It's important to remember that the balance on your secured credit card must still be paid in full each month.
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Pros
- People without a credit history can acquire this card to create one, making loan acceptance easier in the future.
- Some secured credit cards provide travel insurance, credit monitoring, and money rewards.
- The danger of missing payments is less of a problem because of the deposit you make as collateral to your card issuer.
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Cons
- Your secured card may have significant fees, just like any other credit card. Application costs, processing fees, and yearly fees are a few examples.
- If your credit limit is low, you might not be able to use your card to buy something big.
- Even if you apply for a secured credit card, there is no guarantee that you will be approved for an unsecured card.
5. Student Credit Cards
Student credit cards are made especially for college students who frequently have no credit or minimal credit history. A student credit card would often be more accessible to obtain accepted than another kind of credit card for a first-time credit card application.
Unlike traditional credit cards, most student credit cards often do not have an annual fee. They frequently come with additional benefits, such as Cashback or discounts, for making responsible purchases.
Applying for a student credit card and using it wisely may be a significant first step in building credit and developing sound financial habits for life.
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Pros
- You may enjoy the benefits of the rewards and privileges that many student credit cards provide by using them.
- One advantage of a student credit card is that it may help you learn responsible credit usage and money management.
- Student credit cards establish credit history and score. Building credit helps you receive a better credit card, mortgage, vehicle loan, or another loan.
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Cons
- It may be challenging for a student to obtain a credit card with a high limit.
- Your ability to obtain a mortgage, a car loan, the apartment you desire, or any other major purchase may be in danger if your credit score is low so wisely use your card.
- Student credit cards often carry higher interest rates than those conventional credit cards.
6. Business Credit Cards
Business credit cards are made exclusively for commercial use. They provide business owners with a simple way to distinguish between business and personal transactions. There are common charge and credit cards for businesses.
To be eligible for a credit card for business purposes, you do not need to be the CEO of a multinational conglomerate. It doesn't matter if you want to start the bakery of your dreams or want to do some freelancing on the side; they may be beneficial to a wide variety of company models.
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Pros
- Business credit cards feature reduced interest rates, more considerable credit limits, extended periods before interest accrues, and early payment discounts.
- A Business Credit Card helps develop credit. A strong credit score assists with future growth and borrowing.
- A company Credit Card comes with bonuses, incentives, Cashback, special offers, etc.
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Cons
- Most credit card providers offer purchase protection. Business credit cards are not as secure.
- Business credit cards cost more than regular ones because they have higher annual fees and interest rates.
True identity and credit history are required for a business credit card. This might affect your credit score and make you accountable for company credit card late payments.
7. Store Credit Cards
Retail establishments provide store credit cards so customers can charge their purchases and pay them back over time. Although certain shop credit cards can be used inside a specific family of businesses, store credit cards are often exclusively used within the store that offers them.
Similar to other credit cards, store credit cards function similarly. Additionally, “These cards often give additional discounts and frequent shopper benefits when used only at their locations or with associate retailers,” according to the Consumer Financial Protection Bureau.
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Pros
- You frequently get a discount on the goods you buy when you initially sign up for a shop credit card.
- You might not need to wait to buy what you want if you have a shop credit card.
- There are a lot of retail credit cards that don't charge annual fees and have handy perks. That is why they're an excellent option for a backup credit card in case you lose your primary one.
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Cons
- You might have to search elsewhere if a big credit limit is what you're after. Store credit cards sometimes have a smaller credit limit than other credit cards.
- Outside of the specific merchant that offered the line of credit, store cards are useless. Closed-loop credit is what it is called.
- High APR is levied on store cards because of the high-interest rates that come with lax approval criteria.
8. Co-branded Credit Cards
Store or brand credit cards are issued through established card issuers like Chase, Citi, or American Express as co-branded cards.
These can be hotel credit cards that allow you to earn points inside a hotel loyalty program or airline credit cards that enable you to earn miles within a specific frequent flyer club. Although you may use co-branded credit cards for non-store transactions, some also collaborate with retail establishments.
Co-branded credit cards usually only offer rewards for one brand. Still, the tips are good, and in many cases, the value of these rewards ends up being more than the Cashback.
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Pros
- The most appealing aspect of co-branded credit cards is the promise of ongoing benefits that may be converted into cash back, free flights, or even larger holidays.
- Over time, collecting points can lead to deeply discounted airline tickets or free nights at a hotel, which often makes up for the annual fee.
- Earn airline or hotel points or miles without entering an airport, hotel lobby, or online purchases.
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Cons
- Most co-branded credit cards limit your rewards to usage with the branded firm.
- Finding tips with airlines and hotels might be difficult for individuals who have never done it.
- Even while co-branded credit cards sometimes offer significant sign-up bonuses, you might not be able to utilize them for several months.
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9. Intro 0% APR Credit Cards
The annual percentage rates (APRs) that can be applied to credit card debt can range from 15% to 23%.
Because of this, a credit card that offers a 0% introductory annual percentage rate (APR) might be an appealing choice for customers who want to make a significant purchase and pay for it over a certain amount of time. Credit card APR in inflation times is higher due to interest rates hike, and it impacts your rate when getting a new card.
Check the post-intro APR before applying because the APR will gradually rise. A 0% introductory APR can be a valuable benefit, but make sure you understand the terms and conditions.
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Pros
- Credit cards with an introductory APR of 0% can save you money on interest.
- Many 0% APR credit cards also provide perks. This might include a welcome offer and cashback or rewards points.
- Using a balance transfer credit card to consolidate your debt and pay no interest can help you get out of debt faster.
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Cons
- Late payments on 0% APR credit cards might void the promotional APR term. Late payments violate introductory offer conditions.
- Zero-interest deals last 18 or 21 months. When the introductory time finishes, your card's standard variable rate will apply.
- When you apply for a new credit card, a hard inquiry will be made on your credit report, which can lower your credit score.
Which Type of Card is Best For Me?
Although many kinds of credit cards are available, it's crucial to consider your goals before selecting a credit card. You want to discover one that complements your way of life, your ideals, and your financial situation.
Knowing the advantages and disadvantages of various credit cards might help you position yourself for success.
