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There are many different types of credit cards you can apply for: standard unsecured credit cards, rewards cards, balance transfer cards and more. Each of these cards have their own uses, as well as advantages and disadvantages.
Learning about the various credit cards you can get will help you make a good decision for your own financial situation. Different cards are useful in different scenarios, so read on to find out which type of credit card could work for you.
1. Standard unsecured credit cards
The most common type of credit card is a standard unsecured card. These cards issue monthly statements, charge interest on unpaid balances and enable you to spend up to a predetermined credit limit. A credit check is required to obtain an unsecured credit card, and most cards require a minimum credit score.
Advantages: enables you to build credit and may offer purchase protection beyond what you’d get with a debit card
Disadvantages: no rewards, so may be less appealing than some other cards if you meet the score minimum
Who it’s best for: anyone who meets the application requirements and is looking for access to revolving credit
2. Cash back card
A cash back credit card works like any other unsecured credit card, but it offers you money back on every purchase you make.
The cash back is usually calculated as a percentage, often between one and five percent depending on the card. In other words, for every $100 you spend on the card, you’ll receive $1 to $5 back. While this is not a significant amount of money on each purchase, it’s helpful over time at paying you back for purchases you would have made anyway.
Advantages: a small amount of cash back can make a difference over time, and some cards offer rotating spending categories that offer a larger cash back percentage
Disadvantages: if cash back motivates you to spend more than you otherwise would have, you won’t come out ahead in the long term
Who it’s best for: anyone who has already been responsibly using a credit card and is ready to handle a card with benefits
3. Travel rewards card
A travel rewards card offers spending incentives similar to cash back cards, but the rewards are focused on travel—flights, hotels, dining and car rentals.
Typically, spending earns points in the form of miles that you can redeem with the credit card company’s partners. By booking directly through your credit card portal, you’ll often receive additional value for the points you’ve earned. Also, these cards often feature extra travel perks like trip insurance, travel statement credits or access to airline lounges.
Advantages: can offer great savings on flights and hotels as well as travel perks like credits or airport lounge access
Disadvantages: often have annual fees that may not be worth it if you don’t spend enough annually
Who it’s best for: frequent travelers, especially those with bigger budgets
4. Store cards
Store credit cards offer perks and rewards that are usually tied to a specific retailer or a group of affiliated stores.
For people who are loyal to a specific brand or store, these cards can offer deep discounts or rewards. In general, retailers entice customers to sign up by offering promotional interest rates—sometimes even zero percent—so be mindful of interest payments down the road if you make a large purchase with a store card.
Advantages: discounts, cash back or other rewards at the specific retailer that can be useful for loyal customers
Disadvantages: these cards can typically only be used at a single retailer, so they don’t replace more general purpose credit cards
Who it’s best for: anyone who shops frequently at a specific store and wants to be rewarded for brand loyalty
5. Balance transfer cards
Balance transfer credit cards enable people with existing credit card debt to refinance with lower interest rates.
For people who have existing debt, a balance transfer can offer a lower monthly payment and the opportunity to pay down the principal of the debt more quickly. Some balance transfer cards have promotional zero percent interest, often for somewhere between a few months and a couple of years. However, the balance transfer itself usually requires a fee, and interest rates after the promotional period are often quite high.
Advantages: can make for a more reasonable payment on existing credit debt
Disadvantages: the transfer fee and high interest rates after promotion may make these cards less than ideal for some situations
Who it’s best for: anyone with credit card debt who has a plan to pay it down within a set period of time could benefit from exploring a balance transfer card
6. Secured credit cards
Secured credit cards require a cash deposit that acts as collateral for the card, so if someone fails to pay their bill, the balance is covered.
These cards are useful for anyone with no credit history or poor credit, as they generally have no credit requirements. Lenders who offer these cards take on no risk, because the credit limit is matched by a cash deposit. After a period of time, you can choose to close a secured card to have the deposit returned, or you may be able to convert the card to an unsecured card. In any case, these cards are one of the best ways to build credit if other forms of credit aren’t available to you for any reason.
Advantages: available to nearly anyone who is trying to build credit, regardless of credit history
Disadvantages: requires an upfront cash deposit and offers no rewards like many other credit cards
Who it’s best for: anyone who is just starting out on building credit or needs to rebuild credit after acquiring negative items like late payments, repossessions or bankruptcy
7. Student credit cards
Student credit cards are aimed specifically at young people who have little or no credit history, helping them build credit with a lower limit and some potential rewards.
These cards generally have no annual fees and few requirements, making them appealing to young people and college students who are looking to get started building credit. Many student credit cards offer incentives for good grades and some even offer modest cash back rewards. While these cards often have lower credit limits, making regular purchases and paying the statement balance in full every month can start your credit history off right.
Advantages: few requirements and potential incentives for students and young people
Disadvantages: often have lower credit limits and not as many perks as other credit cards
Who it’s best for: students and young people looking to build their credit for the first time
8. Low-interest credit cards
Low-interest credit cards offer very low interest rates, and in some cases they offer zero percent APR for a promotional period.
These credit cards are often used by people who need to make a large purchase they want to pay off over time without accruing interest. In general, the best practice for credit cards is to pay the full balance every month, but many people find themselves in difficult situations where an expensive and necessary purchase is possible because of a low-interest credit card.
Advantages: no interest during promotional periods or low interest for the duration you hold the card
Disadvantages: may encourage spending beyond your means, and can be difficult to manage after the promotional period ends
Who it’s best for: anyone who needs to finance an expensive purchase without accruing interest
9. Small business credit cards
Small business credit cards are useful for small business owners or sole proprietors who need to separate personal and business expenses.
When starting a new business, it can be tempting to simply charge expenses to personal credit cards. In most cases, though, it’s best to use a separate card, as this makes it easier to track expenses and manage taxes. Business cards can also have significant rewards associated with them, and they can help business owners get funds to get a new project off the ground.
Advantages: helps business owners keep personal expenses separate from business expenses, and often have great rewards
Disadvantages: may have more stringent application requirements than other types of credit cards
Who it’s best for: small business owners or professionals who are granted a business credit card by their employer
10. Co-branded credit cards
Co-branded credit cards are offered by credit card companies in cooperation with another business—often an airline or hotel chain.
These cards are managed by major credit card companies, but they offer rewards linked to a specific partner. That can mean earning airline miles, hotel stays or other branded rewards. For people who are loyal to a specific brand, co-branded credit cards often include high-quality introductory promotions and significant rewards. That said, these cards also often involve more steep annual fees and less flexibility.
Advantages: for people who consistently use one airline or hotel chain, these cards reward loyalty with generous perks
Disadvantages: high annual fees and a lack of flexibility can make these cards unappealing to many consumers
Who it’s best for: brand loyalists who want to be rewarded for their spending
Which credit card is right for you?
Now that you know about the many different types of credit cards, the question is: which one should you get?
There’s no single best credit card, but deciding on a good credit card means taking your own financial situation and credit history into account. Here are a few options to consider:
- You’re building or rebuilding your credit: Consider getting a secured credit card or student credit card depending on your circumstances, as these can both help you build credit regardless of your existing credit history.
- You’re already using credit comfortably: Think about a cash back card, a travel rewards card or a co-branded credit card. Any of these options will begin to pay you back for your spending, and as long as you pay your bill each month and don’t overspend, you’ll likely come out ahead.
- You’re struggling with credit card debt: A balance transfer card or a low-interest credit card could be the fix for your situation. By transferring existing debt to a zero-interest card or financing new purchases with a low-interest card, you may be able to escape the cycle of debt caused by high-interest credit cards.
No matter what kind of card you’re already using or thinking about getting, make sure to monitor your credit usage. Taking time to regularly review your credit score and look through your credit report will help you reach your goals and notice any trends.
For example, your report may reveal inaccurate information that needs to be corrected—either due to identity theft or a reporting error. Working with a credit repair company can help you get back on track with your credit journey by helping you address errors in your credit history.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
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