Types of Credit Cards
We’ve researched the differences and benefits of nine credit card types, including rewards cards, business cards, and charge cards.
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At first glance, the sheer number of credit cards can be overwhelming. From rewards credit cards to airline-branded cards, it can take time to make sense of each card’s features and benefits.
Understanding what every credit card offers is essential for several reasons. With the proper selection, you could reap the benefits of an excellent credit score while enjoying exclusive membership rewards and bonuses. However, if you select the wrong option, you could face high fees and costs that outweigh the benefits.
To help you make an informed choice, we’ve created a comparison guide outlining the different types of credit cards available.
In this guide:
- Why do companies offer so many types of credit cards?
- Rewards credit cards
- Business credit cards
- Balance transfer credit cards
- Student credit cards
- Secured credit cards
- Cobranded credit cards
- Virtual credit cards
- Charge cards
- All-in-one credit cards
- How to know which type of credit card is best for you
Why do companies offer so many types of credit cards?
Companies offer a variety of credit cards to meet different customer needs. Some are designed for those with excellent credit and offer rewards programs, low interest rates, and high credit limits.
Other cards are geared toward borrowers who may have had trouble managing their finances, such as students or those with poor credit. These cards may offer lower credit limits and higher interest rates but are an effective way to build credit.
Many competing banks and credit unions issue cards. They release new cards with different benefits to appear more attractive than their competitors.
Many cards also offer perks, such as:
- Cash-back rewards
- Travel points
- No foreign transaction fees
By offering a wide variety of cards based on different customer needs, companies can capture more customers and provide incentives for regular card use.
Rewards credit cards
Rewards credit cards offer cash back or other rewards when you make purchases. Many cards have different levels or tiers of rewards based on the amount you spend. Some even offer additional rewards when you use the card at specific retailers or for certain purchase categories.
With a rewards credit card, cardholders can take advantage of the following features:
- Earn rewards points. Depending on the card, users can earn rewards points for every dollar spent or when making specific purchases.
- Redeem rewards points. Redeem points for cash back, statement credits, travel, and more.
- Additional benefits. Some rewards cards offer additional benefits, such as travel insurance and extended warranties.
The two main types of rewards credit cards are cash-back rewards cards and travel rewards cards.
Cash-back rewards cards
This type of rewards credit card lets users earn a percentage of cash back on their purchases. Based on our research of the best cash-back credit cards, the rewards percentages range from 1% to 6% of your spending.
Many cash-back credit cards offer bonus cash back when you use the card at specific retailers or for certain purchases, such as groceries and gas.
This card is best suited for people who want to earn cash back on their everyday purchases.
Find out our top cash-back rewards cards.
Travel rewards cards
Get more from your travels with travel rewards cards.
These cards provide unique benefits, such as the following:
- Travel discounts
- Airport lounge access
- Complimentary upgrades
Some also offer traveler-specific insurance benefits, including trip delay insurance, lost baggage insurance, and rental car insurance.
Some cards offer airline miles when you make purchases with the card. You can redeem these miles or points for free travel, exclusive discounts, or other perks.
These cards could be a wise choice if you’re a regular traveler looking to cash in on the airline miles you fly and hotel nights you book.
We researched the top travel rewards cards.
Business credit cards
Business credit cards are designed for business owners and entrepreneurs. These cards offer business-specific features, such as reward points for business-related purchases, including office supplies and internet, as well as higher credit limits.
With a business credit card, business owners can easily make purchases and track expenses. Business owners can get additional cards for their employees to track spending and make purchasing business supplies easier.
View our top business credit cards.
Balance transfer credit cards
Balance transfer credit cards offer a way to pay down debt, such as other credit card debt. These cards often feature an introductory 0% APR period, allowing consumers to transfer their balances and pay them off without incurring additional interest.
These cards can be a terrific way to save money on interest and pay down debt faster. However, it’s essential to understand the card’s terms and conditions before applying because some may have transfer fees or other restrictions.
See our research on the best balance transfer credit cards.
Low-interest credit cards
Low-interest credit cards offer a fixed interest rate much lower than the standard rate. Like balance transfer credit cards, many low-interest credit cards offer 0% APR.
If you’re planning for a large purchase you can’t pay all at once or plan to carry a balance on your credit card, you’ll save money with a low-interest credit card.
We researched the best low-interest credit cards.
Student credit cards
Student credit cards are often for college students who want to build their credit. Generally, a student must be at least 18 years old and have an income or creditworthy cosigner to get approved.
Student credit cards might offer benefits such as the following:
- Low interest rates
- No annual fees
- No credit score requirement
Student cards can also offer rewards on common student spending categories such as food and gas or on all purchases with the card.
Find out the best student credit cards.
Secured credit cards
A secured credit card might appeal to consumers with poor or no credit scores. These are also a good choice for those wanting to build a good credit score without debt.
With a secured card, users must deposit cash to obtain the card. The deposit becomes the credit limit, which the bank uses to cover unpaid balances if necessary. Because of this collateral, secured credit cards are often easier to obtain than traditional cards.
We’ve researched the best secured credit cards.
Cobranded credit cards
As the term suggests, cobranded credit cards are tied to a particular retailer, airline, hotel chain, or another brand. The brand name is on the card, along with the issuing bank. These cards offer exclusive brand discounts and rewards to customers when they make purchases with the card.
Cobranded credit cards come in different varieties, such as cash-back and store credit cards. Travel credit cards are also cobranded because they offer rewards specific to an airline or hotel chain.
Store credit cards
Store credit cards are cobranded cards for specific retail stores.
These cards feature benefits such as discounts on purchases and exclusive offers. They often have lower credit limits than traditional credit cards, making them a good choice for those who want to manage their spending.
We’ve researched the most popular store credit cards.
Virtual credit cards
Virtual credit cards are nonphysical cards for online purchases. They function the same way as regular credit cards but only exist electronically as credit card numbers.
A virtual card masks your credit card number for online shopping safety. Similar to a standard credit card, a virtual card has a credit limit and is connected to your bank account.
Sometimes, virtual credit card numbers are only for one-time use for added security. However, depending on your preference, you can use them for recurring payments or multiple uses.
We’ve researched three top virtual credit cards:
|Capital One Eno||U.S. Unlocked||American Express Virtual Card Numbers|
|What cards?||Available for all Capital One credit cards||This is a standalone virtual credit card||Available for all American Express credit cards|
|Fees||Depends on which Capital One card you use it with||Load fees for bank transfer: $3 plus 3%|
Monthly maintenance fee: $3.50
Transaction fee: $0.50 per transaction
|Depends on which AmEx card you use it with|
|Features||Easy signup and setup|
Rewards and benefits depend on your associated Capital One credit card
|Option between one-time card and merchant-specific card||Replace your physical card number with a digital version|
Generate a new 4-digit code each time you pay with the virtual card
|Best for||Regular online shoppers who already have a Capital One credit card||Regular online shoppers who don’t want the commitment of a tied-in credit card||Regular online shoppers who already have an American Express credit card|
Several banks offer virtual card options, including Bank of America and Citibank.
Charge cards, or pay-in-full cards, are similar to credit cards, except you must pay off the total balance each month. The main advantage of charge cards is that, like credit cards, users can earn rewards—with no risk of credit card debt.
However, it’s important to note that charge cards may also come with higher annual fees and may be harder to qualify for. They may not be a wise choice for those with poor or no credit.
We’ve researched two top charge cards:
|The Plum Card® from American Express||Capital One Spark Cash Plus Business Credit Card|
|Preset spend limit||None||None|
|Late fee||$39 or 1.5% of past due amount, whichever is greater||2.99% of past due amount|
|Welcome bonus||$500 statement credit after spending $15,000 in first 3 months||$500 after spending $5,000 in first 3 months|
Another $500 after spending $50,000 in first 6 months
$200 annual cash bonus every year you spend $200,000 or more
|Benefits||1.5% cash back on the portion of your balance you pay within 10 days of statement closing date|
Option to carry balance up to 60 days with no interest as long as you make your minimum payment
No foreign transaction fees
Rental car insurance
|5% cash back on hotels and rental cars booked through Capital One Travel|
2% cash back on all purchases
|Best for||Big spenders who want to avoid credit card debt and appreciate travel benefits||Small-business owners who want to avoid credit card debt and earn cash back on travel and all other purchases|
All-in-one credit cards
All-in-one cards combine the perks of several types of cards.
This type of card’s features are programmable, allowing users to choose the ones they prefer. For example, an all-in-one card can include rewards, 0% APR for balance transfers, and even a secured card option.
This benefits those who want to maximize the advantages of a credit card without applying for multiple cards. However, the all-in-one cards we’ve reviewed, including Stratos, Swyp, Coin, and Plastc, are now defunct, and we couldn’t find one that’s still being offered.
How to know which type of credit card is best for you
The right credit card depends on your circumstances and financial goals. The choice depends on factors including, but not limited to, the following:
- Spending habits
- Brand preferences
- Financial situation
- Credit score
When choosing a credit card, it’s essential to consider these factors and weigh the pros and cons of each type of card before making a decision.
To summarize, we’ve prepared a table that presents the different types of credit cards available and whom we recommend them for:
|Type of credit card||Best for|
|Rewards credit cards||Consumers who use their cards for everyday expenses, such as gas and groceries|
|Cash-back rewards cards||Consumers who use their cards for frequent purchases|
|Travel rewards cards||Frequent travelers (personal or business)|
|Business credit cards||Business owners and entrepreneurs|
|Balance transfer credit cards||Consumers with debts they want to pay off without incurring additional interest|
|Low-interest credit cards||People with debts who want 0% interest rates or who plan to make a large purchase they can’t pay off right away|
|Student credit cards||College students who wish to establish their credit scores|
|Secured credit cards||Consumers with no credit history or those who want to rebuild their credit scores|
|Cobranded credit cards||Frequent customers of a specific brand (retail, airline, or hotel chain)|
|Store credit cards||Frequent shoppers of a retail store|
|Charge cards||Consumers and business owners who prefer to pay off their balance in full each month|
|Virtual credit cards||Frequent online shoppers who want to take extra measures for online safety|
|All-in-one credit cards||Tech-savvy consumers who prefer a versatile card (but we couldn’t find any options as of February 2023)|
Whichever card you choose, always read the terms and conditions of the agreement before applying. This will help you get the most from your card and make informed financial choices.
If you spend on your card and pay it off responsibly, you can also build strong credit while you’re at it and even earn rewards.
Author: Becky Neubauer
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