What Are The Different Types Of Credit Cards?

There is a wide variety of credit cards to choose from. Whether your credit score is good, low, you need a card for your business, are a reward-seeker, here are the different types of credit cards you can get. 

Secured Credit Cards

These credit cards require you to pay a deposit to the bank as collateral and generally have “secured” in its name. The Discover it Secured card, for instance, requires that you put $200 down to receive a $200 credit line. 

Every month for eight months, the lender assesses your account and spending to make sure you are using the credit card responsibly. If you pay your statements on time and in full by the eight months ends, you will get your deposit back and have the option to upgrade to an unsecured card.

Unsecured Credit Cards

Unsecured cards are regular credit cards. The cards below are different types of unsecured credit cards.

Student Credit Cards

These cards are for university students who have a brief credit history or no credit at all. Consequently, the line of credit is more limited than other types of unsecured cards. Generally, student credit cards have minimal or nonexistent annual fees and bonuses based on academic performance. For example, some financial institutions reward students who maintain a certain GPA with cash bonuses or points. 

Business Credit Cards

Business credit cards fall into two categories: small business and corporate. A small business card works similar to a personal credit card and is usually used to help new businesses build their credit. On the other hand, large-scale companies can apply for a corporate credit card, which permits multiple users and offers business-centric bonuses like travel or miles. 

Reward Credit Cards

Reward credit cards are a type of unsecured card. There are a variety of reward cards that allow you to receive generous perks based on different categories.

Cashback Credit Cards

These credit cards can help you save money on everyday items by offering you cash as a check, direct deposit, or credit. Usually, credit cards provide between 1% to 6% cashback. 

Before picking a cashback reward card, make sure it aligns with your spending habits. You want to make sure that you’re not just spending money for the sake of getting rewards.

Monthly and annual fees are one more consideration to take into account. For example, if the yearly cost exceeds the cashback money you earn, it may not be worth it.

You also want to know any restrictions on getting your rewards. Depending on the card, you may only be able to redeem your cashback after so many points or months. You may want a card that gives you immediate cashback, so double-check the terms, so you know it’s worth the effort.

Travel Reward Credit Cards

If you frequently travel, a travel reward credit card can help you save big on tickets, hotels, and more. You can get a travel reward card through your bank or a branded card from a specific company.

The latter card type is also referred to as branded cards. These credit cards are an excellent way for travelers to rack up frequent flier points that can be exchanged for tickets, free checked bags, special seating, and more. 

Hotel reward credit cards work the same and give you access to cheaper rooms (or better upgrades), late checkout, or even a free visit.

Like cashback credit cards, you must pick the right travel reward card for your needs and habits. Also, keep in mind that while your points may get you a free ticket, they don’t always cover the cost of tax.

Branded Credit Cards

Branded credit cards are provided by specific retailers who partner with a credit card company. These cards give you points, cashback, and other rewards when you use it at participating businesses.

Charge Cards

Charge cards are different from regular credit cards. While the balance on a standard card rolls over from month to month while accruing interest, you must pay the balance on a charge card. If you don’t, the issuer will fine you.

But that isn’t the only difference. Many charge cards do not come with a predetermined spending limit, although some branded cards do. But just because you don’t have a credit limit doesn’t mean there aren’t limitations; the lender can still cap your spending if it feels the need to.

Charge cards used to be more common, but not so much anymore. They are ideal for those who don’t want to carry debt for an extended time. Additionally, some, like American Express, even offer rewards — but the tradeoff is that you have to pay a higher annual fee.

Subprime Credit Cards

These credit cards are primarily for those whose credit is less than ideal. More often than not, subprime credit cards have hefty annual fees and sky-high interest rates, but some don’t. If used responsibly, subprime credit cards can help you build your credit until you qualify for a better card, similar to a secured card.

 

Source
  • Martin, Asia. “The Forbes Guide to Credit Cards.” Forbes, Forbes Magazine, 23 Aug. 2020, www.forbes.com/advisor/credit-cards/the-forbes-guide-to-credit-cards/.
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