5 Different Types of Credit Cards [Complete Guide]

By: Yara Pollard

Credit cards have almost become an essential tool for making payments because of how convenient it is to use. With it, you can bring less or even no cash at all. Moreover, credit cards are accepted almost everywhere.

Credit cards are being used more and more and this is proven by statistics. According to the Ascent, “only 5% of individuals use no debit or credit card”. Their findings also showed that the overall credit card debt of the United States increased for six consecutive years.

It’s at an all-time high and so far, has no signs of slowing down. Almost everyone makes use of credit cards but not everyone knows about the different types of credit cards. Knowing the different types of credit cards can help you as not all cards are equal.

Some of these cards can be more beneficial to you than others. See what you need from this list of the different types of credit cards based on your needs.

Standard Credit Cards

According to Finder, standard credit cards are the most common type of credit cards. It’s an entry-level type that  most people opt to get, especially those who don’t have credit cards yet but are interested in availing for one. 

This type of credit card has lower annual fees and interest rates compared to premium cards like gold and platinum. Another reason why this is the best card for first-timers is because most premium cards require high minimum income in order to be eligible for application. 

Standard credit cards have the lowest income requirements. They also have the lowest credit limits. Interest rates, on the other hand, may vary. It can go as low as 8.99% per year and as high as 20% per year.

According to Canstar, people who avail for standard credit cards are those who don’t plan on using on a frequent basis. Because of the low interest rates, they feel at ease even when they are not able to pay for the full amount at the end of each month.

The downside of this type of credit card is that it is not keen on giving rewards. Premium cards offer a lot of different types of rewards to their clients. But, this is not available to standard credit cards.

Balance Transfer Credit Cards

According to Credit Cards, balance transfer is a method you can use to transfer one or more credit card debts with high interest rates to another card which offers a lower interest rates. Doing this allows the client to focus more on paying the outstanding balance of the debt.

But transferring outstanding debts from one card to another also has some downsides. During the transfer process, the client might incur some unexpected charges. Also, credit card promotions like “0% interest rates for x months” can become void after the transfer.

Secured Credit Cards

In order to get premium cards, a high credit score is required. For clients with low credit scores or those who don’t meet the criteria for minimum income required, banks recommend secured credit cards.

Do you know what your credit score is? If your answer is no or you are unsure, you can use tools like Credit Sesame to look at your credit score for free.

According to Discover, secured credit cards are credit cards that require a security deposit in case the client becomes unable to pay his outstanding debt. This is a solution banks offer to clients who don’t have good credit scores.

The Balance mentioned that the credit limit of secured credit cards are often the same with the amount deposited by the clients for security. But there as some cases where the credit limit can be higher more so for security deposits that come in the form of mortgages.  

Rewards Credit Cards

As the name suggests, rewards credit cards offer incentives or rewards on purchases through credit. According to The Balance, there are three different types of reward credit cards. They are:

  1. Cashback
  2. Points
  3. Travel

Cashback rewards are percentages of the amount spent by the cardholders paid back to them. If you prefer incentives to be in the form of monetary amount, cashback cards are ideal for you.

A great example of this is the Old Navy credit card. According to Future Fuel, with every valid transaction, you earn:

  • 5 points for each $1 spent at Gap Inc. and all of their sister brands. This applies whether you purchase from a physical store or online.
  • 1 point for each $1 spent at other qualified stores that accepts Visa credits. This also applies whether you purchase from a store or online.

Points is another type of reward wherein points can be earned from a certain value of a purchase. For example, you can earn 10 points for every $2 you spent. These points can then be exchanged for merchandise or money.

Travel rewards credit cards are one of the most common types of credit cards being used because card owners can earn free hotel accommodation, flights and other travel benefits from this type of rewards credit card. 

According to Johnny Jet, travel rewards credit cards are divided into three types:

  • Airline
  • Hotel
  • Flexible

Charge Cards

Charge cards is a type of credit card that has no preset spending limit. According to The Balance, just a few banks offer this type of card because of its characteristic of having no preset credit limit.

While this sounds better than a regular credit card, the catch of a charge card is that you have to pay the balance at the end of each month. Also, while charge cards have no preset spending limit, card issuers have a soft spending limit based on data they have collected from you such as income, payment and spending habits. 

The trouble with charge cards are the steep penalties with not being able to pay your balance in full by the due date. The penalty fee could either be a percentage of your balance or a flat fee. This depends on your agreement with the card issuer. 

These are but some of the myriad of credit card types available. Do you have all of these with you? If you’re planning to get more credit cards, know the ones that best fit your needs so you can also take full advantage of their perks. 

Despite the types of credit cards you will use, be responsible and diligent with paying on time. This way, you also get to build a good payment history and credit score. 

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