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10 Credit Card Types Explained

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updated: July 4, 2024

If you're thinking about getting a credit card, then you may be overwhelmed by how many different cards are on the market. There are a dizzying number of choices available, making it difficult to decide which one to go for.

A good starting point is to group credit cards by type. Normally, each card will fall into one of the following 10 categories: rewards, cash back, travel, premium, business, student, 0% introductory purchase APR, secured, co-branded, and store cards. To decide which credit card is right for you, you need to know a little bit about each type.

1. Rewards credit cards

Rewards credit cards reward spending with points, miles, or cash back.. Rewards credit cards are best for people who pay their statement balances in full and on time, so they don’t have to pay credit card interest. Many rewards cards are only available to those with good or better credit.

2. Cash-back credit cards

Some people prefer cash-back cards because they offer easy-to-understand value. Cash-back credit cards give you back a percentage of the money that you spend on the card. Some cash-back cards offer a flat rate of cash back on all purchases, such as 2% back on every dollar spent on purchases. Or they may have bonus categories, such as 3% back on dining while paying 1% on other purchases.

Some cards also offer bonus categories that rotate throughout the year. For example, the card_name offers 5% cash back on up to $1,500 in combined purchases in rotating quarterly bonus categories. Plus, it earns 5% cash back on travel purchased through Chase, 3% cash back on dining, 3% cash back on drugstore purchases, and 1.5% cash back on all other purchases. New account holders of the Chase Freedom Unlimited® credit card can also earn a $200 bonus if they spend $500 on the card within the first three months of activation. While not all cash-back credit cards have welcome bonuses like this, it’s nice that some cards do.

3. Travel credit cards

Travel credit cards earn rewards that you can use to pay for travel, such as airline tickets and hotels. These cards may offer other travel-related benefits as well, such as travel insurance or priority service.

Travel credit cards can differ considerably. Some earn rewards that are transferable to multiple airline or hotel programs, while others offer points or miles that can be used only for one co-branded airline or hotel company. A few travel credit cards even offer bonuses for purchases in other spending categories, such as gas or dining. Some travel credit cards also offer new account bonuses—and many, but not all, charge an annual fee.

It can be hard to compare the value of rewards earned from different travel credit cards since points can be worth different amounts for each airline or hotel.

4. Premium rewards cards

Many of the most valuable rewards credit cards that you hear about in the news or online are premium travel rewards credit cards. Premium rewards cards often have large signup bonuses and special benefits. They are most often used for travel, as many of these cards earn travel rewards and offer travel-related benefits. Metal credit cards cards and black credit cards are often associated with luxury and exclusivity due to their unique and sophisticated designs, which can make them desirable options for those seeking a premium credit card experience.

Premium rewards cards almost always have high annual fees, but they can offer great value if you properly utilize them. Many premium rewards cards are also only available to those with good or excellent credit. Two of the most popular premium rewards credit cards are the card_name and the card_name. Both charge at least $550 in annual fees but come with many cardholder benefits and opportunities to earn statement credits for specific purchases.

5. Business credit cards

Business credit cards allow small business owners to separate their personal purchases from their company’s expenses while also earning benefits, rewards, or other special features that are specifically designed for business needs. Just like personal credit cards, there are a variety of small business credit cards that offer different benefits. There are no-annual-fee business cards, cash-back business cards, and 0% APR business credit cards.

For business owners whose employees travel, there are cards that offer airline miles, hotel points, or general travel rewards. For example, the card_name offers the ability to transfer rewards to airline or hotel partners. It also offers 3x points on up to $150,000 spent each year on shipping, travel, internet, cable, and phone services, and online advertising.

6. Student credit cards

You have to be at least 18 years old to open your own credit card account. If you're older than 18 but younger than 21, you may face stricter verification requirements for a credit card, a type marketed to students between roughly age 18 and 22.

Student credit cards are designed specifically for the needs of students. Students usually have little to no credit history, little to no income, and particular spending habits. Some student credit cards may even offer extra cash back in categories where students tend to spend more, such as restaurants and grocery stores. Others encourage good habits by offering bonuses for paying your bills on time or getting good grades.

7. 0% APR introductory purchase cards

Credit cards with 0% APR allow you to take a break from interest charges on new purchases for a set period of time after opening the card. These cards can help you pay down an existing balance, save for the future, or get ahead on future payments.

Legally, these interest-free promotional financing offers must be for at least six months. However, the most competitive cards offer 0% introductory APR financing for 15 months or longer.

Besides the length of the promotional financing period, features such as balance transfer offers, standard interest rates, and other fees charged by the card are important to consider when comparing 0% APR cards. Also, keep in mind that you’ll still have to make a minimum monthly payment and will incur interest on any remaining balance once the promotional rate expires.

8. Secured credit cards

Secured credit cards require the cardholder to pay a refundable security deposit, which typically becomes the amount of the card’s credit limit. Secured credit cards are easier to get approved for than most unsecured credit cards because you’re effectively pre-funding your credit line. This makes them an option for people with bad credit.

Secured cards are also often less expensive than the unsecured credit cards that are available to people with bad credit. Another benefit of most secured cards is that the issuers report your balance and payment history to the three major consumer credit bureaus: Experian, Equifax, and TransUnion. So, if you’re using your card responsibly and paying your bills on time, it will help you to build your credit.

Other than the security deposit and credit limit, secured credit cards work essentially the same way as any other credit card. The physical card looks the same as other credit cards, so when you use your card to make a payment, no one will know that you're using a secured credit card. And you must make your monthly payment, as the security deposit is only used in the event of a default.

Once your credit improves, your card issuer may even allow you to move from a secured card to an unsecured card without closing your original line of credit. When that happens, you can close your secured card account and receive a refund of your deposit.

9. Co-branded credit cards

Some companies partner with banks to offer co-branded credit cards. These credit cards provide benefits and rewards for the company (for example, a particular airline or hotel) but are issued by the bank. If you're a regular customer of one airline or hotel, it may make sense to get their co-branded credit card.

Airline credit cards

Airline tickets can be one of the more expensive parts of travel, so some people like to have a co-branded airline credit card to earn miles or points that can be redeemed for award flights. Some airline credit cards also offer benefits with the airline, such as free checked bags or priority boarding. Almost every major airline and some smaller airlines have credit cards. Examples include United, Southwest, Delta, and Frontier.

Hotel credit cards

After airline tickets, hotels are the next largest item on most people’s travel budget. If you like to stay with one hotel brand over others, it may make sense to have a co-branded credit card for that hotel. Hotel credit cards offer points that can be redeemed for award stays. Some hotel credit cards also offer additional benefits—early check-ins, late check-outs, room upgrades, and the like. Almost every major hotel company and some smaller hotel companies have credit cards. Examples include Hyatt, Hilton, Marriott, IHG, and Wyndham.

10. Store credit cards

Some retailers offer co-branded store credit cards. Frequent shoppers at particular retailers may want to maximize spending by opening a store credit card. Store credit cards often earn bonus points on money spent at that store, and may give you discounts or special rewards. Some store credit cards can only be used for purchases at the store, while other store cards are part of a larger payment network like Visa or Mastercard, and can be used anywhere.

Which type of credit card is right for you?

Deciding on the type of credit card that’s the best fit for you is a very personal decision. It will depend on a variety of factors, such as how much you want to pay in annual fees, your spending habits, and your credit score. Before applying for a credit card, review the card’s credit requirements and features to make sure they fit your needs and qualifications.

TIME Stamp: Do some research before choosing a credit card

There are many types of credit cards available today. Before choosing one, research which credit cards best fit your needs and are attainable. Once you have narrowed down the type of credit card that you want to get, look at the terms of the specific cards in that category you’re willing to consider.

Frequently asked questions (FAQs)

How many types of credit cards should I have?

How many types of credit cards to have will vary by person. You should only hold as many credit cards as you're able to handle responsibly. If having access to too much credit creates temptation to overspend, just one credit card may be the best choice for you. But if you're able to handle multiple cards, it may actually be beneficial to your credit score. That’s because it will decrease your credit utilization ratio. Multiple credit cards give you an opportunity to maximize rewards earnings as well.

What are $0 annual fee credit cards?

Some credit cards charge an annual fee to hold the card; others do not. Zero annual fee credit cards don’t charge an annual fee for holding that credit card. They may still charge other fees, however. Read more to understand if no annual fees credit cards are the right choice for you here.

How do credit cards impact my credit score?

Credit cards have a variety of impacts on your credit score. When you apply for a credit card, a hard inquiry will show up on your credit report, which can have a temporary negative impact on your credit score. Also, when you open a new credit card, it will bring down the average age of your credit accounts, and could slightly affect your credit score. Over time, this will improve as your card accounts age. And if you responsibly manage a variety of cards your credit limit will likely increase and lower your credit utilization, another way to raise your credit score.

But the most important factor is your payment history and your debt level. If you don’t make your credit card payments on time each month, your credit score will suffer. When you use your credit cards responsibly, by paying your bills on time and carrying little, if any, debt, they can positively impact your credit score. In fact, just having a single credit card can increase your credit mix, which is a positive thing for your credit score.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.

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