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Interested in getting a credit card, but overwhelmed by all the options?
It’s not your imagination. According to my very non-scientific research, there are approximately one zillion different types of credit cards available.
And the best type of credit card for you will depend on several factors: your previous experience with credit, your reasons for getting a credit card, and where and how you plan to use your new plastic.
Here are nine basic types of credit cards, plus how to choose the right one for you.
Credit Card Issuers and Networks
One of the first things you’ll encounter when getting a credit card is a jumble of words you’ve probably seen on store windows for years: Visa, Amex, Mastercard, Discover. And then there are banks, too: Chase, Capital One, Citi, etc. What’s the difference?
- Credit card networks, like Visa and Mastercard, are the companies that process your payment every time you swipe.
- Credit card issuers, like Chase and Citi, are the banks that loan you money when you make a purchase. They determine your card’s rates and features, and provide the online platform where you pay your bill.
Networks, in other words, are the middlemen between you and the issuing bank. That’s why you’ll see hundreds of types of Visa cards, all with different features and logos. The same goes for Mastercards. Amex and Discover, on the other hand, are unique in that they act as both a network and an issuer.
Cards for Poor or Limited Credit
Now that you’ve got the issuer vs. network thing down, let’s move on to types of cards. First up: cards for people who are new to the world of credit (or have made a few mistakes in the past).
Each month, your card issuer will report your behavior to the credit bureaus, helping you build good credit as time goes by.
Our pick: Petal Cash Back Visa® Card, for its $0 annual fee, alternative approval process, and 1%–1.5% cash back rewards (Petal Card is issued by WebBank, Member FDIC)
Read more about starter credit cards here.
Like the previous category, student cards are meant for individuals who haven’t yet had experience with credit. (Some even come with bonuses for getting good grades!)
Just be sure to pay your bills on time, as youthful credit mistakes can haunt you for years to come.
Read more about student credit cards here.
Unlike “unsecured” credit cards, which give you a mini loan each time you swipe, secured cards require you to pay a security deposit that usually serves as your credit line. Because of this additional precaution, they’re generally targeted at people with bad credit.
Since most secured cards will still report your behavior to the credit bureaus, they provide a smart pathway toward repairing your credit.
Read more about secured credit cards here.
Cards for Carrying a Balance
We don’t recommend making a habit of carrying a balance on your credit cards. That’s because, if you pay your statement balance in full each month, you’ll typically never owe interest on purchases.
That said, if you plan to carry a credit card balance — whether you’re making a big purchase you’d like to pay off over several months, or whether you just need a little breathing room — these cards are a good choice.
Balance Transfer Cards
If you couldn’t tell from the name, balance transfer cards are designed specifically for this purpose. They usually have a 0% interest rate for a limited period, which allows you to make payments toward your debt’s principal, rather than just the interest. Many, however, charge balance transfer fees — often 3% of whatever you transfer ($30 on a $1,000 balance, for example).
Our pick: BankAmericard® Credit Card, for its $0 balance transfer fee and 0% APR for 15 billing cycles
Read more about balance transfer credit cards here.
0% APR Cards
Though balance transfer cards often feature 0% introductory APRs, they are meant for moving a balance from one card to another. Straight 0% purchase APR cards are a better fit if you’re making a big purchase — say a new computer — that you’d like to pay off slowly without incurring interest.
As the 0% intro APR period often ends after 12–15 months, make sure you pay your balance in full before the higher interest rate goes into effect.
Our pick: U.S. Bank Visa® Platinum Card, for its long 0% APR period (18 billing cycles) and $0 annual fee
Read more about 0% APR credit cards here.
Cards for Earning Rewards
If you’ve got solid credit scores and are ready to get rewarded for the spending you’re already doing, then it’s time to get a rewards credit card.
Before applying, just make sure you’ll pay off what you spend each month. Since these cards have high APRs, interest payments would quickly negate any rewards you earn. If you need to float a balance on a credit card, jump to the previous section and apply for a 0% APR card instead.
Cash Back Cards
With these cards, issuers return a certain percentage of every purchase you make — spend $1,000 on a 1% cash back card, for example, and you’ll get $10 back.
You could then redeem that $10 for statement credits, travel, gift cards, or merchandise. Some cards earn additional cash back when you spend money in certain categories, like groceries or dining; others earn flat-rate cash rewards on all purchases.
Read more about cash back credit cards here.
Travel Rewards Cards
Travel rewards cards allow you to earn points and miles that you can redeem for free flights, hotel stays, car rentals, and more. Many cards also come with travel and car rental insurance that can protect you on the road.
There are two main types of travel rewards cards:
- General travel cards, which earn points and miles that may be redeemed with a variety of partners
- Co-branded cards, which are affiliated with one particular airline or hotel chain, and often come with perks like free bags or elite status
Read more about travel rewards credit cards here.
Gas and Grocery Cards
These cards earn points or cash back at gas stations or grocery stores — and can either be general or co-branded. For people who aren’t big travelers, and who would rather earn rewards on everyday spending, gas and grocery cards are a good bet.
Our pick: Blue Cash Preferred® Card from American Express (Review), for earning 6% cash back at U.S. supermarkets (up to $6,000, then 1%), 3% at U.S. gas stations, and a $250 statement credit for spending $1,000 in the first 3 months
Ever had a retail associate ask you to apply for a store’s credit card as you were checking out? Then you’ve been offered a retail credit card. These cards run on the major networks, are issued by banks, and are co-branded with a particular chain.
Though they often offer decent rewards for loyal shoppers, they sometimes have poor customer service and high APRs — so proceed with caution.
Read more about retail credit cards here.
Which Type of Credit Card Is Right for You?
As you can see, there are many types of cards — and the “right one” depends completely on your habits and needs.
No matter which type of card interests you, here’s what you should always check before applying:
- Credit required: Is the card for people with limited credit history? Poor credit? Excellent credit? There’s more to the application decision than just credit, but since each credit card application (slightly) dings your credit scores, you should only apply for cards you’re likely to qualify for. To make it easier, you can check to see if you have any prequalified credit card offers available.
- Annual fee: Once you start exploring the world of credit cards, you’ll discover that many charge a yearly fee simply for having the card. Some make up for it with generous rewards and perks; others are less valuable. So make sure your chosen card is worth its annual fee.
- APR: The “annual percentage rate” is the interest rate you’re charged on your credit card purchases. As noted above, however, you can avoid all interest charges on purchases by paying your statement balance in full each month.
Still stuck? Here’s a list of the best credit cards available.
For rates and fees of the Blue Cash Preferred® Card from American Express, please click here.
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