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When it comes to credit cards, there are a lot of options to choose from. Understanding the different types of credit cards is important, especially if you’re looking for a card that’s aligned with your financial needs and spending habits.
Let’s explore different types of credit cards, from cash back and travel credit cards, to secured credit cards and student credit cards, as well as the features that can help you choose the right credit card for you.
Cash back credit cards offer a percentage of your eligible purchases back in cash rewards, which you can then redeem directly for direct deposits, statement credits or checks.
Depending on the card, you may be able to earn:
For applicants looking at a cash back credit card, it typically makes sense to apply for a card that offers a percentage back in one of your most common spending categories, such as gas or groceries.
Travel and airline credit cards can help you earn points or miles on eligible purchases that can be redeemed specifically for flights, hotel stays, reimbursement of application fees for Global Entry or TSA PreCheck® and more. Depending on the card, they may also offer other travel-related perks like free checked bags or priority boarding.
Ideal users for travel and airline credit cards include frequent travelers, whether for business or pleasure, or any traveler who may be looking for travel perks and rewards.
Retail credit cards (also called store cards) are offered by specific retailers, like clothing stores or grocery chains. Co-branded retail cards are offered by brands in partnership with an issuer and can be used at a broad range of locations, with users earning reward points particular to the retailer. Otherwise, some retail credit cards may only be accepted at the retailer that issued the card.
In addition to points, cash back or financing for purchases, some retail credit cards may offer attractive discounts and perks. Frequent shoppers of specific stores may find retail credit cards from their favorite stores an ideal fit.
It’s important to understand the full scope of terms before signing up for store credit cards. For example, some of these credit cards may offer special financing with deferred interest. That means you’ll be charged interest on the entire purchase if you don’t pay it off within a certain timeframe.
A rewards credit card typically refers to any card that will allow cardmembers to earn points, miles or cash back on eligible purchases. Depending on their perks, other types of credit cards, such as airline, travel, cash back and retail cards, may also be considered rewards cards.
Rewards credit cards may offer a flat reward rate for all purchases or different reward rates for certain categories, like dining or travel.
Redemption options may include:
You may also find that many rewards credit cards offer introductory bonuses. Those typically offer a certain number of rewards if you spend a certain amount within a given timeframe.
When applying for a rewards credit card, try to find one that offers points for a category in which you make frequent purchases. Rewards cards often benefit customers who make regular purchases in the select categories targeted by a specific card. Also, for Rewards credit cards, consider the ease of redemption of the rewards points and be aware of any other restrictions including any points expiration rules.
Some credit cards offer a low introductory APR which applies for a limited period after you open your credit card account. The low intro APR may apply to purchases, balance transfer or both. Balance transfers allow you to move existing debt to a different credit card, typically for a fee. If you can pay off the balance before the low introductory period ends, you may be able to keep additional interest charges to a minimum. During the introductory APR period, make sure to make at least any required monthly minimum payments.
Secured credit cards require users to provide a deposit, which the issuer uses as collateral in case the cardmember can’t make payments on the card. These cards typically have a credit limit that’s equal to the amount of the deposit.
Provided the cardmember can keep up with the minimum payments and the issuer reports to the credit bureaus, secured credit cards can help build positive payment history. For this reason, secured credit cards make sense for those with no or poor credit history and who are looking to build their credit.
Business credit cards can help business owners and employees manage business expenses and keep personal and business expenses separate. The benefits may include higher credit limits, expense tracking, employee credit cards and the chance to help build business credit. These cards may also offer the opportunity to earn reward points, miles or cash back for common business expenses, such as advertising or office supplies.
Keep in mind that these cards typically require a personal guarantee. That means you agree to be personally responsible for all charges including any employee credit card purchases if your business cannot make the credit card payments. Also, business credit cards may have higher APRs compared to business loans, so they’re generally best used for ongoing expenses that you can pay off relatively quickly.
Student credit cards are designed with students in mind and may offer perks, such as cash back on purchases. Since these cards are meant for students, they typically offer lower credit limits than traditional credit cards.
These cards can be useful for students looking to access credit, earn cash back and help build credit history. However, keep in mind that you do still have to provide proof of income (or use a qualified cosigner) to access student credit cards.
When choosing a credit card, it’s important to assess your financial goals and spending patterns. Start by looking for a type of credit card that lets you capitalize on your current spending or provides benefits that align with your financial goals. From there, you may consider factors like:
Comparing different cards this way can help you find the card that will help you make the most out of your spending.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
