Credit cards can be an excellent tool to help you build credit or earn rewards. Sometimes, a low-interest credit card can help you cover a significant expense and pay the balance off with predictable monthly payments.
With so many types of credit cards available, choosing the right one that meets your needs can be challenging. Knowing the features of each type of credit card and how it works can help you find the best match. In this roundup, we’ll cover all the different types of credit cards, including some key benefits and drawbacks to consider.
Standard/unsecured credit cards
Standard credit cards are the most common type of credit card since they are unsecured and don’t require collateral or a down payment. These credit cards offer a credit limit based on your credit. The better your credit score, the better terms you’ll likely receive.
Throughout the month, you can borrow against your credit limit. You’ll need to pay the minimum payment amount at the end of the monthly billing cycle to avoid paying fees. If you carry a balance at the end of each billing cycle, you’ll be charged interest based on that balance amount.
Here are some key features of standard credit cards:
- Higher credit limit based on your credit score.
- The standard interest rate, or APR, is around 20.99%, depending on the specific credit card.1
- May have a variable interest rate that changes based on the market.2
- Some credit cards have other fees like annual, late payment, and foreign transaction fees. Read the fine print and understand what fees may apply to your account.
|Variety of card options||May not qualify with poor credit|
|Higher credit limit with a good credit score||Some cards have more fees and high interest|
|Pay off purchases over time||Potential to overspend|
Secured credit cards
Secured credit cards require a cash deposit for collateral. This deposit often ranges from $100 to $300 and serves as your limit to borrow against. Like with a standard credit card, you’ll need to make a minimum monthly payment.
Your payments are reported to the three major credit bureaus – Experian, Equifax, and TransUnion – to help you build and increase your credit score.
Here are some key features of secured credit cards:
- The credit limit is based on the amount of your deposit. Some card issuers may increase your credit limit after a few months if you use your card wisely and make timely payments.
- You may be able to upgrade your secured card to an unsecured card after a few months if the card is used wisely.3
- Some secured credit cards also charge an annual or monthly fee and may have a variable interest rate.4
- You could get your initial security deposit returned if you pay off your balance in full and close the card account.5
|Easy to qualify for||Upfront deposit required|
|Helps you build credit||Lower credit limit|
|Could upgrade to an unsecured card in the future|
Rewards credit cards
Rewards credit cards offer you points or cash back rewards for purchases. The rewards are based on your spending. Some cards offer rewards for all purchases, while others only provide awards for purchases in specific spending categories.
You can redeem rewards for travel, cash back, a statement credit, gift cards, merchandise, or other rewards, depending on the card. This type of credit card is best for people with a good or excellent credit score who make a significant amount of monthly card purchases, including money spent on shopping, travel, and dining.
Here are some key features of rewards credit cards:
- The credit limit is based on your credit score, and rewards cards are typically geared toward people with excellent credit.
- Some cards may have an annual fee.
- Many rewards cards offer a sign-up bonus allowing you to earn a lump sum of reward points or cash back once you spend a certain amount during the first few months of opening your card.
- Some rewards cards limit the cash back or total points you can earn in a given quarter or calendar year.
|Earn rewards for everyday spending||Won’t qualify with poor credit|
|Optional sign-up bonus||Some cards have an annual fee|
|Tiered rewards in select categories for some cards||Some cards have reward limits|
Cash back credit cards
A cash back credit card is a specific type of rewards card that provides cash back to reward your purchases. Cash back credit cards typically offer a fixed rate of cash back per $1 spent on your card. Others offer tired cash back rewards based on your spending categories.
For example, one card may give you 5% cash back on every $1 spent at grocery stores, 3% cash back on fuel at gas stations, and 1% back on all other purchases. A credit card like this could help you save money by earning extra cash on everyday purchases instead of earning rewards.
Rewards are typically redeemed as a statement credit, a check, or a deposit into your bank account.
Here are some key features of cash back credit cards:
- The credit limit is based on your credit score and is typically geared toward people with excellent credit.
- Several cash back cards don’t have an annual fee.6
- Some cards may offer a higher cash back bonus for certain spending categories.
|Earn cash back for everyday spending||May not qualify with poor credit|
|Maximize rewards in specific spending categories||Some cards have an annual fee|
|Different reward redemption options||Some cards have reward limits|
Store credit cards
Store credit cards are available through retail stores and usually can only be used at a particular chain of stores. These credit cards may also offer discounts, cash back, other rewards, and exclusive benefits like free shipping or extended warranties.
Here are some key features of store credit cards:
- Store cards tend to have higher interest rates and fees than other credit card types.
- Rewards are limited and only available through the specific store or retailer.
- These cards also tend to have lower limits which can lead to overspending if you’re not careful.7
|Earn rewards for shopping at your favorite store||Limited use (often can’t use at other stores)|
|Receive benefits like store credit, free shipping||Higher interest rates and fees|
|May save money on purchases||Lower credit limits|
Business credit cards
A business credit card is a smart option if you have a business or are self-employed. These cards help business owners keep expenses separate from personal expenses. They can also provide rewards for business-related spending.
Business credit cards have higher limits or no preset credit limit, which is helpful when making larger business purchases.
Here are some key features of business credit cards:
- Some cards offer a sign-up bonus or low introductory APR.8
- Card issuers will also consider your credit score and business details when considering you for a card. Have your business’ tax identification number on hand when applying.
- Business credit cards offer rewards like points to redeem for travel and cash back. The higher spending caps can maximize rewards.
- Some cards also offer business owners certain perks, like discounts on accounting services.
|Higher credit lines||Need business details to apply|
|Helps build business credit||Typically need good or excellent credit|
|Earn rewards||Risk of carrying a high balance|
Travel credit cards
Travel credit cards offer reward points or miles that can be redeemed for travel expenses like flights, hotels, and car rentals. These cards also offer travel-related benefits like travel insurance, airport lounge access, and baggage protection.
Travel credit cards are a natural fit for people who travel often and want to earn rewards to supplement the cost of traveling. However, these credit cards may have higher interest rates and fees than others.
Here are some key features of travel credit cards:
- The credit limit is based on your credit score. Travel cards are typically geared toward people with excellent credit.
- Many travel cards offer a sign-up bonus allowing you to earn a lump sum of bonus points or cash back for spending a certain amount during the first few months.
- Some travel cards have an annual fee and foreign transaction fee for purchases made in other countries, but others don’t.
|Earn rewards to redeem for travel||Need good or excellent credit to qualify|
|Sign-up bonuses||Some cards have high annual fees|
|Additional travel perks||May not be worth the cost if you don’t travel much|
The type of credit card you choose should support your goals
Choosing the right type of credit card will depend on your financial needs, lifestyle, and spending habits. Your credit score can also affect the types of credit cards you qualify for.
Having more than one credit card can also help you improve your score and earn different benefits and rewards. Just be sure not to take on more cards than you can comfortably handle.
What are the 4 types of credit cards?
Four of the most common types of credit cards include standard or unsecured cards, secured cards, rewards cards, and store cards. Travel cards often fall under the category of a rewards credit card.
What are the 7 types of credit?
Several types of credit cards are available, including standard credit cards, secured cards, rewards cards, cash back cards, store cards, travel cards, and business cards. Depending on your needs and current credit score, you may not qualify for every type of credit card. Read the terms and conditions before applying for and accepting a new credit card, including fees, rewards, interest rates, and credit limit options.
What are basic types of credit cards?
The most basic type of credit card is a standard unsecured card, also known as a traditional credit card. There are many standard credit cards, and you may need fair or good credit to qualify. If you want to rebuild your credit score, consider getting a secured credit card, which is easier to qualify for.