When it comes time to apply for a credit card, understanding different types of credit cards is important for applicants looking to choose cards aligned with their financial needs and spending habits.
Let’s review different types of credit cards, including cash back credit cards, travel and airline credit cards, rewards credit cards, secured credit cards, business credit cards and retail credit cards. By looking at the features of each, you’ll better understand how to choose the best card for you.
Cash back credit cards
Cash back credit cards offer a percentage back through points or rewards on eligible purchases that can then be redeemed directly for cash, statement credits, direct deposits or gift cards . Some cash back credit cards may offer a percentage of rewards per category. For example, if a cash back credit card offers 2% cash back on all eligible purchases, you’ll earn 2 cents for every dollar you spend.
Some cash back credit cards may offer different percentages of cash back for different spending categories. A card may offer 3% cash back on dining and travel, 2% cash back on grocery stores and wholesale clubs, and 1% cash back on all other purchases. Other cash back credit cards offer flat-rate rewards, meaning you’ll earn a fixed percentage of rewards for every purchase.
For applicants looking at a cash back credit card, try applying for a card that offers a percentage back in one of your common spending categories, such as gas or groceries.
Travel and airline credit cards
Travel and airline credit cards can help you earn points or miles on eligible purchases that can be redeemed for flights, hotel stays, seat upgrades and more. Depending on the card, they may also offer other travel-related perks like airport lounge access or priority boarding.
Ideal users for travel and airline credit cards include frequent travelers, whether for business or pleasure, who are seeking travel perks and rewards.
Retail credit cards
Retail credit cards are cards offered by specific retailers, like clothing stores or grocery chains. In some instances, retail credit cards can be used at a broader range of locations, with users earning reward points particular to the retailer. In other instances, retail credit cards can only be used at the retailer who issued the card.
In addition to points, cash back or financing for purchases, retail credit cards can offer attractive discounts and perks. Frequent shoppers of specific stores may find retail credit cards an ideal fit.
Rewards credit cards
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, airline, travel, cash back and retail cards may all be considered rewards cards.
Some rewards credit cards may offer more points for specific spending categories. Cardholders can redeem these points for different kinds of rewards, including gift cards, online purchases or statement credits on a credit card balance.
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.
Secured credit cards
Secured credit cards require users to deposit a cash amount that will typically equal the amount of the card’s credit limit. This deposit acts as collateral in case the user cannot make payments on the card.
If a cardholder can make at least timely minimum payments on a secured card’s current due balance, they can use a secured card to build positive repayment history. For this reason, secured credit cards make a great option for individuals with no or poor credit history and who are looking to build their credit, such as students.
Business credit cards
Business credit cards can help business owners and employees manage business expenses and keep personal and business expenses separate. The benefits may include expense tracking and the chance to build credit for a business.
Small business owners and entrepreneurs are the primary candidates for benefitting from business credit cards. However, they should remember that although using a business credit card may not impact a user’s personal creditworthiness, typical criteria for personal income and creditworthiness may still apply.
How to choose the right credit card
When choosing the right credit card, it’s important to assess your financial goals and spending patterns. You may be able to find a credit card that either lets you capitalize on your current spending or offers benefits that align with your financial goals.
Factors like APR, annual fees and additional perks should also inform your decision about which credit card is best for you. Consider comparing different cards based on your goals and spending habits to 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.
