Types of Credit Cards [All Different Types of Credit Cards Explained]

The best way to get quick access to available funds is to get a credit card. With a large number of credit card issuers available in America, it can be quite difficult to pick the right one. There are various terms, conditions, and product types that users can choose from. The types of credit cards range from a basic card to a premium card with loads of perks and benefits.

Before you sign a contract with a credit card issuer, you should first identify the product you need. In this article, we will take a closer look at all the different credit card options available as well as help you choose which option will be best for you.

We will be covering the following topics:

  • What is a Credit Card?
  • Important Factors and Features of the Different Kinds of Credit Cards
  • Types of Credit Card Options
  • How to Choose a Credit Card
  • FAQs

What Is a Credit Card?

Credit cards are issued by banks or other financial institutions. It’s the exact same rectangular shape as a normal debit card and is made from either metal or plastic.

Depending on your credit score and income, the financial institution will decide how much credit they will give you. This credit, or the available money you can borrow, can be used to buy luxuries, pay for services, or cover an unexpected expense. The only strict condition is that the cardholder pays back the borrowed amount.

Unfortunately, this doesn’t mean that you’ll pay back only the amount that you’ve borrowed. Credit card issuers are profit-based companies, which means that on top of the borrowed amount, you’re also expected to pay interest fees and other additional charges. Depending on the type of card and the financial institution, different interest rates and fees will apply.

For a more in-depth description of what a credit card is, go here.

Important Factors and Features of The Different Kinds of Credit Cards

Because the cardholder will be expected to pay back all the fees incurred, it’s important that they consider the key factors and features of a credit card before signing an agreement.

Annual Fee

This is a fee that is charged on a yearly basis and it covers any service fees associated with the card issuer. Most credit card issuers don’t charge an annual fee. Reasonable fees will range from $99 to $300. The higher the annual fee, the more likely it that there are more perks and benefits available.

Rewards

As you spend money using your credit card, the issuer might give you special cashback rewards. Cardholders can get up to 6% cashback when they use their card at selected stores and supermarkets.

Intro APR

The best type of credit card will always have low APR rates. APR rates affect your account’s interest rates. Some companies offer a teaser intro APR rate of 0%, but this can jump up to 30% after the initial entry period. Make sure you read the contract’s fine print before signing up for a high APR rate and know what a good APR rate is.

Credit Limit

This is the maximum amount of money that the card issuer is able to lend you. When you use up all the credit available, your card will be maxed out. Before you can access the available credit you need to pay off any outstanding debt first. When you stick to your monthly repayments diligently, your credit limit can increase.

Minimum Payment

Depending on the terms and conditions of the credit card issuer, you’ll be appointed a minimum monthly payment. This payment is usually fixed or set to a percentage of the amount owed. Neglecting to stick with the minimum payment each month may result in penalties.

Late Payment

When you miss a monthly payment, some credit card issuers will report you to any one of the three major credit bureaus within 30 days. Whilst others are a bit more lenient on missed payments, granting you a 90-day grace period to catch up on payments.

Collateral or Security Deposit

Consider whether the credit card type requires collateral or not. Collateral is a cash deposit that acts as a security for the card issuer in case the cardholder doesn’t stick to his/her monthly payments.

The collateral or security deposit is refundable after you’ve paid off your credit card in full.

Types of Credit Cards

Ranging from bank-issued cards and student credit cards to travel and store credit cards – there are multiple options available. Let’s take a closer look at some of them:

Bank-Issued Cards

This type of credit card is issued by a bank under the terms and conditions set by the bank itself. There are several credit card options from bank issuers that include unsecured and secured credit cards:

Unsecured Credit Cards

An unsecured credit card is a card type that has revolving credit. Cardholders have the option to pay off the full amount owed at the end of the month or transfer it to the next month. We recommend any of the following unsecured credit cards:

Card Intro APR Regular APR Annual Fee Min. Credit Score
Capital One Platinum Visa Credit Card N/Ag 26.99% $0 580+
Petal 2 Visa® Credit Card N/A 12.99% – 26.99% $0 630+
Indigo Platinum Mastercard N/A 24.9% $0 300-579+
Milestone Gold Mastercard N/A 24.9% $79 first year
$99 thereafter
300-579+
Surge Mastercard Credit Card N/A 25.90% – 29.99% $0 300+

Secured Credit Cards

This is a bank-issued card that is secured by a cash deposit. Typically, the deposit ranges from $200 to $300. The bigger your deposit, the higher your credit card limit will be. We recommend any of the following secured credit cards:

Card Security Deposit Regular APR Annual Fee Min. Credit Score
OpenSky® Secured Visa® Credit Card $200 17.39% $35 300-689+
Secured Mastercard® from Capital One $49, $99, or $200 26.99% $0 Bad
First Progress Platinum Elite Mastercard® Secured Credit Card $200 19.99% $29 300-689+
First Progress Platinum Prestige Mastercard® Secured Credit Card $200 9.99% $49 300-689+

Both secured and unsecured options are multipurpose credit cards that can be used for a multitude of payment purposes.

Student Credit Cards

A student credit card is issued by the bank and is specifically aimed towards first-time credit card owners. Because these cards are aimed towards first-timers, interest rates tend to be much higher.

In 2009, a Credit CARD Act was put into place to restrict the marketing and availability of these specialty credit cards to those between the ages of 18 and 20. This is to ensure the responsible usage of these cards. Student credit cards are only issued to people between the ages of 18 and 30 who are registered as full-time students. They also tend to have excellent perks and benefits like cashback and rewards.

We recommend any of the following student credit cards:

Card Intro APR Regular APR Annual Fee Min. Credit Score Benefits
Discover it Student Cashback 0% for 6 months 12.99% – 21.99% $0 630+ Up to 5% cashback
Good grades rewards
Refer-a-friend
Discover it® Chrome N/A 12.99% – 21.99% $0 630+ Up to 2% cashback Cashback match
Good grades rewards
Deserve® EDU Mastercard for Students N/A 18.74% $0 690+ Up to 1% cashback Refer-a-friend
Journey® Student Credit Card from Capital One N/A 26.99% $0 630+ Up to 1.25% cashback
$60 streaming subscription bonus
Petal® 1 “No Annual Fee” Visa® Credit Card N/A 19.99% – 29.49% $0 300+ 2% – 10% cashback

Travel Cards

A travel credit card is different from other credit card types in that instead of giving available credit, it gives rewards in the form of miles or points. Issued by either banks or airlines, travel cards can be used for travel-related purchases.

Even though this kind of credit card comes with many perks and benefits, it’s usually accompanied by high-interest rates and annual fees. If you’re a frequent flyer, you will benefit from a travel card by saving on hotel rooms and flights.

We recommend any of the following travel credit cards:

Card Intro APR Regular APR Annual Fee Min. Credit Score Benefits
American Express Green Card 0% 15.99% – 22.99% $150 700+ 3x points on transit, travel, and restaurants
$100 Clear credit
$100 LoungeBuddy credit
Journey® Student Credit Card from Capital One 0% for the first 15 months 26.99% $0 630+ Up to 1.25% cashback
Capital One Venture Rewards Credit Card 0% 17.24% – 24.49% $96 700+ 60,000 miles intro bonus
2x miles on every purchase
The Platinum Card® from American Express 0% Pay Over Time Feature; 15.99% to 22.99%APR $550 700+ 70,000 miles intro bonus
Up to 10x points
UBER VIP Status
Access to Global Lounge
American Express Gold Card 0% Pay Over Time Feature; 15.99% to 22.99%APR $250 700+ 60,000 point intro bonus
Up to 4x reward points
$120 UBER cash
$120 Dining credit

Store Cards

A standard store credit card is issued by specific retailers or groups of related retailers. This card can only be used at the store that issued it – usually to purchase home goods or clothing. Most store credit cards have a $0 annual fee and excellent reward systems.

We recommend any of the following store credit cards:

Card Intro APR Regular APR Annual Fee Min. Credit Score Rewards
Capital One® Walmart Rewards™ Mastercard® N/A 17.99% – 26.99% $0 670+ Up to 5% cashback
Lowe’s Advantage Card N/A 26.99% $0 580+ 5% off or special financing when spending more than $299
Target RedCard™ Credit Card N/A 24.40% $0 580+ 5% spending discount at Target, Target.com, and in-store Starbucks
Amazon Prime Rewards Visa Signature Card N/A 14.24% – 22.24% $0 580+ Up to 5% cashback
Initial $70 Amazon gift card
Gap Visa® Credit Card N/A 25.99% $0 600+ Earn 5 points for every $1 spent
20% bonus points p/quarter

Other Types of Credit Cards

In addition to bank-issued credit cards, there are a few other types you can consider that include the following:

0% Intro APR Credit Cards

These are cards that offer very low-interest rates and intro APRs. A low-interest credit card will save you money in the long run. 0% intro APR rate periods usually last between 14-18 months after which the regular APR applies.

We recommend any of the following 0% intro APR credit cards:

Card Intro APR Regular APR Annual Fee Min. Credit Score
Discover it Cash Back 0% for 14 months 11.99% – 22.99% $0 690+
Blue Cash Everyday® Card from American Express 0% for 15 months 13.99% – 23.99% $0 690+
American Express Cash Magnet® Card 0% for 15 months 13.99% – 23.99% $0 690+
Capital One Quicksilver Cash Rewards Credit Card 0% for 15 months 15.49% – 25.49% $0 690+
Discover it® Chrome 0% for 14 months 11.99% – 22.99% $0 690+

Business Credit Cards

Specifically aimed towards businesses, the business credit card type is available to companies of all sizes. Access to a line of credit can help businesses grow and build their credit profile. Learn more about business credit cards in this article.

We recommend any of the following business credit cards:

Card Rewards Regular APR Annual Fee Min. Credit Score
American Express® Business Gold Card 70,000 membership reward points 14.24% – 22.24% $295 670+
The Blue Business® Plus Credit Card from American Express 2x membership rewards 13.24% – 19.24% $0 690+
The Business Platinum Card® from American Express 85,000 membership reward points
5x rewards rate
14.24% – 22.24% $595 740+
Capital One Spark Cash for Business One time cash bonus of $500
2% cashback
20.99% $0 for the first year, $95 thereafter 700+
Capital One Spark Miles for Business One time bonus of 50,000 miles
2x rewards rate
20.99% – 26.99% $0 for the first year, $95 thereafter 690+

Other credit card types include:

Charge Card

A card that enables the cardholder to make purchases paid by the card issuer. The balance of the card isn’t revolving and has to be paid within a fixed time period, usually 30 days.

We recommend: Centurion® Card from American Express

Prepaid Card

Not linked to an individual’s bank account, the prepaid card has a monetary value stored on it that can be used at specific stores.

We recommend: Bluebird by American Express

Credit Cards for Kids

Specialty credit cards like those aimed towards children are perfect to help your young ones build their credit history while they are still at school. The primary owner of the card will still be the guardian or parent of the child, with the child being an authorized user.

We recommend: FamZoo

Virtual Credit Card

Not a physical rectangular piece of plastic, but rather a virtual temporary credit card. You can shop online by providing a generic identification number.

We recommend: Capital One Eno

How to Choose a Credit Card that Suits Your Need

Now that you know all the options available, it’s time to figure out which credit card will best suit your specific needs. Follow these tips on how to pick the right credit card type for you:

Step 1 – Credit Score

Unfortunately, if you have a low or poor credit score you won’t be eligible for certain credit card types. Before you start applying, request your free credit report from any one of the major credit bureaus. Then check whether you fit the minimum credit score requirement of the credit card issuers.

Step 2 – Purpose

Identify what your purpose for having a credit card is. Do you want to improve your credit score? Get travel miles? Purchase from a specific store? Or do you want to have access to revolving credit as a student, individual, or business owner? After you’ve identified the exact purpose you want the credit card to serve, you can continue.

Step 3 – Research and Compare

Since there are numerous credit card issuers available in the US, you should definitely do some research before signing an agreement. Find out what are the different types of credit cards by reading guides like this one. Then compare recommended credit card providers’ terms and conditions to find the best deal that suits your needs.

Step 4 – Application

When you meet all the credit issuer’s eligibility requirements you can fill in an application and wait for a response.

Conclusion

Applying for a credit card can not only give you access to revolving credit, but it can also help you build credit. As long as you choose the right type of credit card for your needs, you’ll be able to use it accordingly.

Consider the different factors mentioned in our guide before signing a contract to ensure that you’ll be able to stick to monthly payments and the issuer’s terms and conditions. Be aware of the different rewards in order to benefit from its full potential and reap all the perks.

FAQ

What are the Main Types of Credit Cards?

The main types of credit cards include a bank-issued credit card that’s either secured or unsecured.

What Credit Card Type Should I Choose?

This depends on your personal needs. Consider your credit score and what you want to use your credit card for.

What’s the Best First Credit Card to Get?

When you have no credit history, then the best first credit card you can get would be either a store credit card or a secured credit card. This will help you improve your credit score while you get used to monthly debt payments.

ABOUT AUTHOR

I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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