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There are thousands of different types of credit cards offered in the U.S., by hundreds of different banks and credit unions. Just as all of the different animals of the world can be classified in different classes such mammals and reptiles, it’s possible to do something similar with credit cards. We break down the various types of credit cards for you here:
Which credit card is best for you depends on a variety of factors, such as your credit scores, spending habits, if you carry a balance on your card, and if you’re looking to get rewards. So do a little homework before applying for a new credit card to make sure you get the best type of credit card for you.
Rewards Credit Cards
Rewards credit cards are one type of credit card that allows you to earn points, miles or cash back, depending on how much you spend every month. Furthermore, there are two kinds of rewards cards offered. Many feature cash back, or a rewards program operated by the credit card issuer, such as Chase Ultimate Rewards or the American Express Membership Rewards program. Others offer rewards in a loyalty program operated by a co-branded partner, such as an airline, a hotel, or retail store.
For example, the Gold Delta SkyMiles® card from American Express offers you frequent flyer miles with Delta Airlines, and the My Best Buy credit card from Citi offers you points that you can redeem for purchases from Best Buy stores. And while non-rewards cards won’t offer you any points, miles or cash back, you can expect a better interest rate than from a similar card that offers rewards. Non-rewards cards are also less likely to have an annual fee.
A rewards credit card might be for you if you travel a lot, particularly if you use a specific airline or hotel when taking trips. Many rewards cards also have promotional offers with bonus points when you sign up for a new rewards credit card and make a certain amount of purchases in the first few months.
Cash Back Credit Cards
Cash back credit cards are specific rewards credit cards that offer cash back on purchases you make. You may get one flat rate—giving you cash back on all purchases—or many cash back credit cards have different categories that offer various cashback rates depending on the purchase type (such as gas, groceries, retail, or travel).
You’ll want to review the details on how much cash back you get and any specifics for redeeming or applying that cash to your credit card balance. This will help you make sure to find the right cash back credit card for you.
Balance Transfer Credit Cards
Some credit cards feature promotional financing offers for balance transfers. These cards allow you to transfer your balance from an existing account and incur reduced or no interest charges for a limited time, typically six to 18 months. However, nearly all of these cards impose a 3% or 5% fee on the amount transferred, so you’ll want to do the math to make sure it’s worth the transfer.
Balance transfer credit cards may help you if you’ve accrued credit card debt, but you’ll want to make sure to note the length of any promotional offer as interest rates usually go up substantially after any promotional period ends.
Low Interest Credit Cards
Credit cards that offer low interest rates are helpful if you regularly carry a balance on your cards. It’s always best to pay off your credit cards in full each month, or as much as possible. But if you are saddled with some credit card debt, a low-interest credit card can help you avoid racking up additional charges via high interest rates.
Usually to qualify for a low interest card, you’ll need good credit scores as lenders want to ensure you’re a low risk to default. Read your credit card terms carefully before applying for a new card so you understand the full picture on interest rates and fees you’ll have to pay.
Student Credit Cards
Some credit card issuers offer special student credit cards. These are products designed for people attending college who have a limited credit history. A student credit card will not have as competitive rewards and benefits as other credit cards, but it should offer better rates and fees than a subprime card. Some student cards even offer rewards for timely payments or achieving good grades. And most importantly, students with a limited credit history can qualify for one of these cards.
Credit Cards for Bad Credit
If your credit scores are lower (579 or lower is considered a “bad” FICO® Score), you’ll likely need to look into options that are tailored to those with little or no credit history, looking to rebuild their credit, or with poor credit. If any of these describe your situation, these are some types of credit cards that may work for you:
Subprime Credit Cards
These types of credit cards are tailored to those with poor or bad credit. They will usually offer less competitive rates, terms and fees than cards made for those with fair, good or excellent credit. However, a subprime card will not require the payment of a security deposit before your account can be opened. For example, the Milestone® Gold Mastercard® is available to applicants with poor credit, and has an annual fee of between $35 and $99.
Secured Credit Cards
Secured credit cards are another type of card that can help you if you’ve been denied for credit or are just starting to build up your credit history. A secured card is one that you make a deposit to “secure” and that deposit is your credit limit. You will need to have the deposit ready when applying for the card as you’ll need to pay it immediately—either with the application or before you are able to activate and use the card.
You likely won’t get many perks or rewards with a secured credit card, but it’s invaluable to build a solid credit history by making on-time payments and keeping your credit utilization low. (Your credit utilization is the amount of credit you’re using compared to your credit limit, and is a key factor in most credit scores).
After your account is opened, a secured card will work just like any other credit card. You will have to make a monthly payment, and you can incur interest charges if you choose to carry a balance. After a year of on-time payment, many secured card users find that their credit has improved enough to qualify for a standard, unsecured card.
Starter Credit Cards
Starter credit cards are ideal for anyone without a credit history as they may show more flexibility or utilize alternative data for approval. A starter credit card may help with building credit.
Prepaid cards are cards that must be loaded with funds before you can use them. They look like credit or debit cards but are quite different. Prepaid cards don’t impact your credit score, so while they are easy to get, they aren’t going to help you build credit. Some prepaid cards can be used at ATMs, but likely carry a hefty fee to do so.
Prepaid cards are more similar to debit cards than credit cards since any amount you spend is debited from the total amount you put on the card. Some prepaid cards are reloadable, so you can add more money to them. Many people wonder what the difference is between a secured card and a prepaid card is and the main difference is that a secured credit card usually allows you to build credit. It acts like a regular credit card, the only difference being that the credit limit is based on the deposit you make when opening the card.
Credit Cards for Fair Credit
If you have fair credit, you have more options for credit cards than those with bad or no credit. However, you’ll still have fewer choices than consumers with good or excellent credit scores. While your exact credit score will depend on which scoring model you’re looking at or is being used, a fair FICO® Score ranges from 580 – 660. Consumers with scores in this range may still find it hard to get approved for credit or receive the best interest rates.
You can learn more about the different FICO Score ranges here. Subprime and secured credit cards may also be the best options for you if your credit scores are fair. Find credit cards for fair credit now.
Small Business Credit Cards
A small business credit card is like a consumer card, and some card issuers offer very similar cards for both markets. Small business cards can also come in rewards and non-rewards versions. However, a small business credit card will offer rewards, features, and benefits that are more suited to the needs of small business owners. While a consumer card might offer you bonus rewards for purchases from supermarkets or department stores, a small business card might feature additional rewards for advertising expenses or for purchases at office supply stores.
Small business credit cards can also come with expense tracking and reporting features that can be useful to many companies. Also, small business credit cards are exempt from some of the protections offered by the CARD Act of 2009, although many card issuers have voluntarily chosen to make their small business credit cards comply with the limitations that this law applies to consumer credit cards.
Finally, large businesses, government, and nonprofits can use a type of credit card called a corporate card, which grants a line of credit to the organization, not to an individual business owner.
Store Charge Cards or Retail Cards
A store charge card, sometimes also called a retail card, is a kind of credit card that is only able to make purchases from a designated retailer. These cards are not part of a larger payment network such as Visa, Mastercard, American Express and Discover, so you can’t make purchases from any merchant other than the one that’s co-branded to the card.
A charge card is a type of credit card that requires you to pay your entire statement balance in full every month, rather than carry a balance. This type of credit card is not as common as it used to be, and American Express is currently the only major card issuer that offers them. Furthermore, it usually allows cardholders to opt-in to a program that allows them to extend payment on their purchases, further blurring the line between the products marketed as charge cards and those that aren’t.
Virtual Credit Cards
Virtual credit cards, also known as disposable credit cards, are newer options that don’t require a physical card. There are different versions of virtual cards—some are standalone and some connect to an account with a physical card as well. Major financial institutions like Bank of America and Citi offer virtual card options and there are some startups with them as well.
There are additional options now in the form of mobile wallets for consumers to try. Also, some cars now have apps where you can pay for things like gas via the in-dash system.