What Type of Credit Card Should I Get?

Since the first “Diners Club” credit card in 1950, the industry has adopted all types of cards for consumers. Each has their own benefit, but choosing the one that’s right for you isn’t always so simple.

In this article we’ll review the nine most popular types of credit cards.

  1. Rewards Cards
  2. Zero Interest Credit Cards
  3. Travel Cards
  4. Balance Transfer Cards
  5. Secured Credit Cards
  6. Flexible Spending Credit Cards
  7. Luxury Credit Cards
  8. Business Cards
  9. Student Credit Cards

#1.) Rewards Cards

Rewards cards are credit cards that let you to accumulate rewards (or points) on each purchase you make. Card rewards can take many different forms, from points to miles to cash back rewards for every dollar you spend. These cards offer you the opportunity to redeem these rewards for merchandise, discounts on travel or other purchases, or even statement credit on your card.

For the most part, rewards credit cards will offer a points system in which you earn 1 point for every dollar you spend on the card. You can redeem those points after you’ve paid off each monthly statement.

In most cases the rewards are offered on the credit card company website, or are redeemable at the store of choice (ex: Macy’s Card).

However, some credit cards offer bonus points for certain categories, depending on the card’s focus.

  • gas stations
  • grocery stores
  • airfare, hotels, and dining (travel)
  • cash back at select stores

Many rewards cards offer signup bonuses as well, enticing new cardholders with the prospect of a large lump sum of cash back or points rewards if certain spending thresholds are met in the first three months of ownership.

When it comes to deciding which form of rewards you would like, cash back rewards cards are a popular choice for cardholders. Rather than relying on a points system, these cards usually offer 1-percent in cash back for every dollar spent on the card for purchases. For bonus categories, this number can go up anywhere from 2 – 6 percent.

There are two primary approaches card companies use for organizing rewards programs: single-tier cards that offer an unlimited, flat rewards rate for every purchase made, and a tiered card that offers limited bonus rewards for certain categories, up to a certain dollar value each quarter.

The former category is perfect for ‘spend and forget’ users, while tiered cards allow organized spenders to maximize their rewards.

#2.) Zero Interest Credit Cards

Zero interest credit cards are cards that entice new cardholders with a long introductory period of 0% APR after getting the card.

FYI: An Intro period typically lasts anywhere from 6 – 18 months. After this time the cardholder is not obligated to pay interest on the balance they accrue on the card.

While this grace period does not last forever – credit card companies wouldn’t make money if they offered cards with no interest – even zero-interest credit cards charge for things such as balance transfers and cash advance.

Ultimately a zero interest card appeals to consumers because it lets you hold an outstanding balance for the first 12 – 18 months, without consequence. But after that teaser rate ends, the interest on the amount owed can jump upwards of 20-percent annually.

#3.) Travel Cards

Travel cards are a specific kind of rewards card that caters to frequently traveling cardholders – offering rewards in the form of points, cash back, or frequent flyer miles that can be used for select airlines. Some travel cards also provide bonus rewards for booking hotels through the card.

The best travel rewards credit cards provide all the benefits of a typical rewards credit card – bonus points or cash back on bonus categories, a large signup bonus for meeting a purchase threshold in the first three months of having the card – but with a large emphasis on redeeming them for travel purchases like hotel reservations and flights.

In addition to these perks, travel cards offer perks such as no currency exchange fees, no blackout dates or travel restrictions, and travel amenities such as rental car insurance, and luggage insurance protections.

If your credit is not strong, or you have made mistakes in the past with your credit usage, you may qualify for credit cards for people with poor credit. These cards don’t offer the same caliber of rewards as regular rewards cards, often with no intro APR periods and a hefty annual fee. However, the recommended credit score to qualify is lower, making it easier to get.

Cards like these are meant for cardholders who need to rebuild their credit after a significant loss in their credit rating, or for those meant to build their credit in the first place. While the cards themselves are not features-heavy, they are advantageous as a means to increase your credit score through responsible spending – a stepping stone to better credit cards.

#4.) Balance Transfer Cards

Balance transfer credit cards are cards whose primary purpose is to hold a balance taken from another card. When cardholders build up a significant balance on one or more credit cards, they can transfer them to a balance transfer credit card – which typically has a long introductory period of zero interest, and no balance transfer fees during this period.

With the help of balance transfer cards, cardholders with large balances are given the opportunity to pay down balances without having to worry about accumulating large fees every month on a high-interest credit card.

Even though balance transfer cards aren’t super useful from an everyday spending perspective, their primary utility is to buy time in order to pay off debt.

#5.) Secured Credit Cards

A secured credit card is another type of card meant for cardholders with low or no credit. Unlike other credit cards, which rely on unsecured debt that requires no collateral, secured credit cards require a cash deposit to the bank that comprises your credit limit. The cardholder cannot spend above that credit limit, unless they provide a bigger deposit to raise said limit.

This is an extremely reliable way to build credit for those starting out building their credit careers, or hoping to recover from negative experiences with credit in the past.

Secured cards require no lender to assess past credit history or credit behavior; there is no risk, since you are providing the funds. However, with good spending, you can use the card to build your credit.

#6.) Flexible Spending Credit Cards

Flexible spending credit cards are ones that don’t have a fixed credit limit. Each one varies depending on other factors such as your credit score, payment history, and income level. While they tend to have the same late fees and annual fees as most normal credit cards, the fundamental difference is that you are not punished for going over your credit limit.

Though flexible spending cards offer some much-needed forgiveness in the event of overspending, it can have a negative impact on your credit score. While most credit cards report your credit utilization ratio as your balance compared to your credit limit, flexible spending credit cards will often not report their credit limit.

#7.) Luxury Credit Cards

Luxury credit cards are the gold standard for travel credit cards – premium cards that grant the cardholder with significantly higher rewards and better amenities than the average travel card. Recipients of these cards often receive features like access to VIP airport lounges, travel statement credits, travel insurance coverage, and much more.

However, luxury cards come with the kind of maintenance that requires the kind of high-income user the card attracts.

Annual fees can run anywhere from $200 – $800 a year, and there are few cards with signup bonuses or intro zero interest periods. If you use the card’s benefits often enough, though, it might be worth paying those costs – provided you can afford them.

#8.) Business Cards

Business credit cards are designed to consolidate debt or expenses into one single card. Business cards also tend to be rewards cards, and some small businesses can benefit from cards that offer bonus rewards for expenses like office supplies and phone/Internet utilities.

Business cards offer companies the means to earmark business expenses and separate them from personal spending, making them easier to track from an accounting standpoint. When their rewards are properly used, they can even further subsidize business expenses by using said rewards to offset their balances.

#9.) Student Credit Cards

Student credit cards are essentially starter credit cards for young people beginning their career and relationship with credit. Most student credit cards operate on similar principles as low-credit credit cards, in that their primary benefit is geared toward building good habits and rewarding responsible spending.

Among the teaching tools student credit cards use to incentivize good behavior include support options for missed payments, bill trackers, budgeting programs and protection from unauthorized purchases. Some student credit cards are directly tied into academic performance, providing modest statement credits for good grades.

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