If you are in the market for a new credit card or just browsing to see what is out there you are likely to notice that there are several different types of credit cards. It may seem confusing but finding the right credit card for you doesn’t have to be. You will want to choose the credit card that benefits you the most based on your spending and financial goals.
Low-Interest Credit Cards
Low-interest credit cards offer an introductory low APR that will increase after your introductory period. Low-interest credit cards are a beneficial type of credit card when you need to make a large purchase but need time to pay it off. You will want to read the terms and make sure you pay off the balance prior to the APR increase.
Rewards Credit Cards
Rewards credit cards provide you with percentage points based on your qualified purchases. With Rewards credit cards you are in control of how to spend your points and when (though some credit card points will expire after a particular period). You get to choose if you want to apply the points toward a statement, gift cards, or merchandise. Bankrate advises these as the top 3 rewards credit cards:
- Capital One VentureOne Rewards Credit Card
- Chase Freedom Unlimited
- Citi Premier Card
Cash Back Credit Cards
Cash back credit cards provide a percentage back to you on your eligible purchases. It is important to know what types of purchases you will be using the cashback credit card for primarily as that may sway the type of cashback card you want. Some cashback credit cards provide you a higher percentage back for dining, gas, or groceries. However, there are some cashback credit cards that will provide a flat rate on all purchases. These are the top-rated cash-back credit cards from Bankrate:
- Citi Double Cash Card
- Discover it Cash Back
- Blue Cash Preferred Card from American Express
- Capital One SavorOne Cash Rewards Credit Card
Secured Credit Cards
Secured Credit Cards are the perfect type of credit card for those who have low credit, no credit, or poor credit. For example, if you have a 598 credit score or lower which is considered a poor credit score by most lenders, you need to be actively working to improve your credit. A secured credit card is an easy type of card to get because you pay a deposit for the limit on the card and if you want to increase your limit you will have to pay more to secure the higher limit. This type of credit card is best for building your credit.
HowSecured Credit Cards Work
- You submit your refundable security deposit, which is typically a $200-$300 minimum. Some cards make you put the security deposit when you apply and others will require it after you are approved.
- You receive your card with your spending limit (the amount you placed as a deposit).
- You use your card and pay the balance as you would with any other credit card while the company holds your deposit in case you forget to pay your bill.
- Once you close your account and have a zero balance then you will get your deposit back. If you have a balance owed the company may subtract the balance from the deposit and provide you with any excess funds.
Travel Credit Cards
Travel credit cards are a type of credit card that provides rewards toward traveling (airline or hotel). Most cards allow you to earn reward points with everyday purchases so you can save up for that trip you have been dreaming of. Depending upon the credit card you choose you may have extra travel perks, such as a loyalty program, airport lounge access, TSA precheck, and more. The top-rated travel credit cards from Bankrate are:
- Capital One Venture Rewards Credit Card
- Chase Sapphire Preferred Card
- American Express Gold Card
- Discover it Miles
Balance Transfer Credit Cards
Balance transfer credit cards allow you to transfer the credit card debt you already have into one card or allow you to get a lower interest rate and pay off your balance faster. Most balance transfer credit cards have a 0% introductory APR that can last 15-21 months depending upon the credit card. They do typically charge you a fee for transferring the balance upfront (usually 3-5%). However, securing the 0% APR is usually worth paying the one-time fee and getting your debt under control. Only you know the details for your current debt and can make sure you will actually be saving money. Here are the top 3 balance transfer credit cards from Bankrate:
- Bank of America Customized Cash Rewards Credit Card
- Wells Fargo Cash Wise Visa Card
- Citi Rewards+ Card
No Annual Fee Credit Cards
In addition to the interest rate (APR) you also need to check what the annual credit card fee is. The annual fee is a yearly fee that you have to pay to continue to use the credit card. If you don’t like the idea of having to pay to use a credit card that you pay for, then you might want to check into no annual fee credit cards.
Airline Credit Cards
Most airlines provide a loyalty program and offer a credit card to help support that program. The airline credit cards will typically provide you bonus points when you make purchases with that brand. Some cards will allow you to earn extra rewards for certain local purchases, such as groceries and gas as well. This type of credit card is best if you frequently travel and are loyal to one particular brand over the others. You may receive extra perks for being part of the airline’s club like free checked bags and priority boarding.
Student Credit Card
Student credit cards are unique in that the credit card company is willing to take a risk knowing the potential to make money long-term. Student credit cards can be quite attractive for students as they often provide perks that another credit card type wouldn’t offer to a younger person with little income. However, credit card companies offering a student card know that upon graduation the student has the potential to make more money and will likely need a credit card for years to come. According to WalletHub, these are the best student credit cards:
- Bank of America Unlimited Cash Rewards Credit Card for Students
- Chase Freedom Student Credit Card
- Discover it Student Chrome
- Bank of America Travel Rewards Credit Card for Students
- Capital One SavorOne Student Cash Rewards Credit Card
- Discover it Secured Credit Card
Hotel Credit Card
Like the airline credit card, hotels have a loyalty program and a credit card to encourage you to use it. Hotel credit cards can provide you with free hotel night stays and upgraded rooms with some programs. This type of credit card is best if you have a preferred hotel choice that you always use if you travel frequently.
No Foreign Transaction Fee Credit Card
If you are traveling a lot overseas then you may be interested in the no foreign transaction fee credit card. This can help save you a lot of money if you use the card a lot on overseas purchases. However, you will want to check the location you plan to travel to and make sure the credit card you have or are planning to have will be accepted there. Typically, Visa and Mastercard are best for traveling inside and outside the United States. Additionally, you will want to let your credit card take care of the exchange rates when you are making international purchases. Dynamic currency conversion sounds appealing so you know exactly how much you are spending, but it is usually not as great of an exchange rate.
0% APR Credit Card
Similar to the low introductory credit cards, the 0% APR credit card offers 0% APR to entice you into their credit card. You will need to make sure you know how long the 0% APR lasts as you don’t want surprise fees and charges. This type of credit card is best for large purchases that you need time to pay down. Just make sure you only charge what you can afford so you are able to pay off the balance prior to the higher interest rate.
Sign-up Bonuses Credit Card
Some credit cards offer a sign-up bonus when you open a new card. This bonus will allow you to earn more points, rewards, or cash back than you will normally. Although this can be a great incentive to open that credit card, you will want to make sure the credit card benefits you beyond your welcome sign-up bonus too. It won’t do you much good if you get an awesome bonus and then are paying an incredibly high-interest rate for a card you are now stuck using.
In The End
Overall, there are so many types of credit cards that can help you build your credit through the years. You will want to make sure you select the best credit card for your situation. You will also want to make sure it’s a credit card you can use long-term as your credit will continue to improve by showing a longer history of open credit account(s). Therefore, it may be tempting to sign up for a card that is providing a sign-up bonus or a 0% APR but if you get stuck with a really high APR later you may have to close that account and open another one sooner than you would like which may not make the offer as appealing. In the end, only you know your situation and credit card needs.