Types of credit card: which one suits your needs?

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With so many different credit cards available, it can be difficult to know which one to choose. You can narrow down your options by knowing the types of credit cards. To help you choose the perfect credit card for your needs, we’ll break down all types of credit cards and what they have to offer.

Types of credit cards

There is a wide variety of types of credit cards. Most of the types are based on the characteristics of the cards. No annual fee cash back credit cards and rewards credit cards are two types of reward credit cards.

A credit card can fall into several categories. For example, a card that earns rewards and does not charge an annual fee would belong to these two types of credit cards.

Below you will find a description of all types of credit cards. When looking for a new credit card, it’s often easier to pick a type first and then search for the best credit cards of that type.

Standard credit cards

Standard credit cards are your basic credit card option without any special features. They don’t earn any rewards or have introductory offers. You can shop on credit and pay for it later, but that’s it. If you don’t know how it works, our beginner’s guide to credit cards can help.

Standard credit cards used to be one of the most common types of credit cards, but they are no longer the case. Most credit cards offer at least some benefit that qualifies them for another category.

Credit cards with no annual fee

No annual fee credit cards are cards that you can take without paying anything. They could also be considered free credit cards. There are often other potential fees that you might be charged, such as late fees, but these are avoidable.

As you might expect, no annual fee cards generally don’t offer as many benefits as annual fee cards. That doesn’t mean they’re light on the benefits though. You can find cards with no annual fee that earn rewards and include all kinds of cool features.

This is one of those types of credit cards that attracts a wide variety of consumers because many people don’t want to pay anything extra for a credit card.

Rewards credit cards

Rewards credit cards earn rewards on every purchase. The reward you get depends on the credit card you have.

Some rewards cards offer cash back. Others offer points or miles that you can redeem. With miles and credit card points, redemption options depend on your card’s rewards program. The terms “points” and “miles” are only a stylistic choice. They don’t determine how you can use the rewards. Some card issuers use the term “points” and others prefer “miles”.

Each rewards credit card has a rewards rate, which is the amount of rewards it earns per purchase. Some rewards cards earn a flat rate on all your purchases. For example, a flat rate rewards card could earn 2% cash back or 2 points for $ 1 on everything. There are also cards with higher rates in bonus categories, such as 3% off groceries and 1% off everything else.

Rewards credit cards are among the most popular types of credit cards, and there are several types. These include:

Airline or frequent flyer cards

Airline credit cards earn you rewards that you can redeem for air travel. These are also known as loyalty cards. Travel cards with no annual fee are also an option. Credit cards for international travel are also popular.

There are two types of airline cards: airline specific credit cards and general airline credit cards.

Airline specific credit cards are tied to an airline’s frequent flyer program and often offer special benefits with that airline. When you use an airline specific credit card, you earn miles / points in that airline’s frequent flyer program. This type of airline card works well if you usually travel with the same airline.

General airline credit cards are not tied to any particular airline. They offer rewards that you can use with multiple airlines. Some cards allow you to transfer your rewards to the frequent flyer programs of several airlines. Others allow you to use your rewards to cover your travel purchases with any airline. And there are general airline cards that give you both of these options.

Sign up bonus credit cards

Sign-up bonus credit cards include an introductory bonus rewards offer. The sign-up bonus is available for new cardholders. There are usually conditions that you must meet in order to receive the bonus.

In most cases, the conditions involve spending a certain amount of money with the card within a set time frame. One card can offer a signup bonus of $ 200 if you spend $ 500 in the first three months. Another can give you 50,000 points if you spend $ 4,000 in the first three months.

0% APR credit cards

0% APR credit cards offer new cardholders a 0% interest rate for an introductory period. This special offer may apply to purchases you make, balances you transfer from other credit cards, or both.

Cards with an introductory 0% APR on purchases are ideal if you need to prepay for something expensive and pay it back over time. Cards with 0% APR on balance transfers, also known as balance transfer credit cards, are designed to refinance credit card debt. Bad credit balance transfer credit cards are also available.

Note that after the introductory period ends, your card’s APR will increase at its normal rate. It’s best to pay off the balance in full before this happens so that you don’t pay any credit card interest.

Based on credit history

There are also types of credit cards based on the credit history of the target card holder. These include:

Each of these types of credit cards indicates who should apply. Bad credit credit cards are for consumers with bad credit. The same goes for the other types of credit cards listed.

Secured credit cards

Secured credit cards require a security deposit to open. The security deposit is often equal to the cardholder’s original line of credit and provides additional security to the card issuer. If the cardholder does not pay their bill, the card issuer can keep the deposit.

These are almost always credit cards for people with bad credit. If you have a better credit score, you can probably qualify for the types of credit cards that don’t require a deposit. But if you are building or replenishing credit, a secured card can come in handy. It is much easier to get approved for a secured credit card since you are paying a deposit up front.

Credit cards by issuer

Credit card types can be based on the card issuer. Some of the most popular types of credit cards by issuer are:

Store credit cards

Store credit cards are issued by a specific retailer. In the past, this type of credit card has earned rewards that you can redeem for gift cards at this retailer, which is the case with the Best Buy credit card. But in recent years, more and more store cards have offered cash back rewards, and the Amazon Prime Rewards Visa Signature card is a notable example. There are also store cards, including the Target REDcard, which offer a discount on every in-store purchase.

Well-known store credit cards are as follows:

Business credit cards

Business credit cards are designed for business owners, with features that reflect that. These cards can have more detailed expense tracking than a regular credit card or offer free credit cards to employees with customizable spending limits. There are also business cards that earn bonuses in areas where business owners spend more, such as advertising or shipping.

Even though this type of card is intended for business owners, card issuers are usually not too strict about who qualifies for a business credit card. You might qualify if you are a freelance writer or just have a small side business selling products online.

Some consumers who don’t have a traditional business still like to open business credit cards for the benefits they offer.

Specialized credit cards

Some types of credit cards do not fit into any of the above categories. These specialty credit cards include:

  • Payment Cards: A type of credit card that requires you to pay your bill in full each month, instead of being able to carry a balance.
  • Student Credit Cards: Credit cards designed for university students.
  • High Limit Credit Cards: Credit cards with higher than average spending limits.
  • Low Interest Credit Cards: Credit cards with lower than average interest rates.
  • Medical Credit Cards: Credit cards designed to finance medical expenses. These cards usually have deferred interest offers that allow you to pay off medical bills over time without interest, as long as you pay in full before the promotional period ends.
  • Contactless credit card: Many card issuers offer contactless versions of their cards. This fast, contactless payment option is growing in popularity.
  • Instant Approval Credit Cards: Credit cards that let you know immediately if you are approved.
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