7 Top Types of Credit Cards and Their Benefits

Standard credit cards – also known as unsecured credit cards – don’t require collateral or a down payment. These cards offer a credit limit based on your credit scores, allowing you to make purchases and pay off the balance over time. The better your credit scores, the better terms you’ll likely receive.

Throughout the month, you can borrow against your credit limit. Then, at the end of the monthly billing cycle, you’ll need to pay the minimum payment amount to avoid fees. At the end of each billing cycle, you’ll be charged interest based on your remaining balance.

Key features of standard credit cards:

• Potential higher credit limit based on your credit scores.
• The interest rate and fees, or the APR, is around 20.99%, depending on the specific credit card.¹
• May have a variable interest rate that changes based on the market.²
• Some credit cards have other fees like annual, late payment, and foreign transaction fees. Read the fine print and understand what fees may apply.

Secured credit cards require a cash deposit for collateral. This deposit serves as your limit to borrow against. Similar to a standard credit card, you’ll need to make a minimum monthly payment.

Your payments on this card are reported to the three major credit bureaus – Experian, Equifax, and TransUnion – to help you build and increase your credit score.

Key features of secured credit cards:

• The credit limit is based on the amount of your deposit. If you use your card wisely and make timely payments, some card issuers may increase your credit limit after a few months.
• You may be able to upgrade your secured credit card to an unsecured card after a few months if you use it responsibly.³
• Some secured credit cards have a variable interest rate and charge an annual or monthly fee.⁴
• If you pay off your balance in full and close the secured card account, you can have your initial security deposit returned.⁵

Rewards credit cards offer you points or cash back for purchases. Some cards offer rewards for all purchases, while others only provide rewards for purchases in specific spending categories.

Depending on the card, you can redeem rewards for travel, cash back, a statement credit, gift cards, merchandise, or other rewards. This type of credit card is best for people with a good or excellent credit score who make a significant amount of monthly card purchases, including money spent on shopping, travel, and dining.

Key features of rewards credit cards:

• The credit limit is based on your credit score, and rewards cards are typically geared toward people with excellent credit.
• Some cards may have an annual fee.
• Many rewards cards offer a sign-up bonus allowing you to earn a lump sum of reward points or cash back once you spend a certain amount during the first few months of opening your card.
• Some rewards cards limit the total points you can earn in a given quarter or calendar year.

Unlike rewards credit cards, cash back cards provide cash back on your purchases, putting money back in your pocket every time you spend. They typically offer a fixed rate of cash back per $1 spent on your card. However, some cards may offer tiered cash back rewards based on your spending categories.

For example, one card may give you 5% cash back for every $1 spent at grocery stores, 3% cash back on fuel at gas stations, and 1% back on all other purchases. This way, your credit card can help you save money by earning extra cash on everyday purchases instead of earning rewards.

Rewards are typically redeemed as a statement credit, a check, or a deposit into your account.

Key features of cash back credit cards:

• The credit limit is based on your credit score and is typically geared toward people with excellent credit.
• Some cash back cards don’t have an annual fee.⁶
• Some cards may offer a higher cash back bonus for certain spending categories.

Also called retail cards are available through retail stores and usually can only be used at a particular chain of stores or at stores that are in the same family as the original retailer. These credit cards may also offer discounts, cash back, and exclusive benefits like free shipping or extended warranties.

Key features of store credit cards:

• Store cards can have higher interest rates and fees than other credit card types.
• Rewards are limited and only available through the specific store or retailer.
• These cards also tend to have lower limits than traditional unsecured credit cards.⁷

If you have a business or are self-employed, a business credit card can help you keep personal expenses separate from business expenses. In addition to separating your finances, they can provide rewards for business-related spending.

Business credit cards have higher limits or no preset credit limit, which is helpful when making larger business purchases.

Key features of business credit cards:

• Some cards offer a sign-up bonus or low introductory APR.⁸
• Card issuers will also consider your credit score and business details when considering you for a card. Have your business’ tax identification number on hand when applying.
• Business credit cards offer rewards like points to redeem for travel and cash back. The higher spending caps can maximize rewards.
• Some cards also offer business owners perks, like discounts on accounting services.

Travel credit cards offer reward points or miles that can be redeemed for travel expenses like flights, hotels, and car rentals. These cards also offer travel-related benefits like travel insurance, airport lounge access, and baggage protection.

These credit cards make sense for people who travel often and want to earn rewards to supplement the cost of traveling. However, these cards may have higher interest rates and fees than others.

Key features of travel credit cards:

• The credit limit is often based on your credit score. Travel cards are typically geared toward people with excellent credit.
• Many travel cards offer a sign-up bonus allowing you to earn a lump sum of bonus points or cash back for spending a certain amount during the first few months.
• Some travel cards have an annual fee and foreign transaction fee for purchases made in other countries, but others don’t.

The decision you make when choosing the right credit card depends on your financial needs, lifestyle, and spending habits. Additionally, your credit score may also affect the types of credit cards you qualify for.

Having more than one credit card can also help you improve your score and earn different benefits and rewards. Just be sure not to take on more cards than you can comfortably handle.