Did you know there are many different types of credit cards available today? This makes knowing which type of credit card will best suit your individual needs a little more complicated. After all, are you looking for cash back, travel rewards, low fees, credit building, debt consolidation, or something else?
Not all credit cards are created equal and neither are credit card companies. Choosing the right credit card and using it responsibly can be a step in the right direction for your financial future.
Let’s take a look at the main types of cards out there you may be considering.
Different Credit Cards
There are several kinds of credit cards out there. Some may fall into more than one category, so knowing what those categories are and what benefits they offer can help you make the right choice.
Not sure what your credit score is? Know your score but not sure what it means? Learn the Facts about Credit Scores here.
Rewards Credit Cards (General)
A general rewards credit card lets you earn rewards in a wide range of different ways. Though every reward option may be different, you shouldn’t expect penalties for getting cashback. Whereas a travel credit card will penalize you for using points for cash instead of for travel, a general rewards card will not. If you don’t want to be locked into any one type of reward, a general rewards card is probably a smart bet because of its superb flexibility.
General rewards credit cards are available through hundreds of banks and lenders. Be sure you’ve found the best rates and perks before pulling the trigger.
Cash Back Credit Cards
If you think being limited by the types of rewards or point you can use is silly, then a cash back credit card may be the right choice for you. A cashback card will typically offer a flat cashback rate for different types of purchases. For example, 2% cashback on grocery purchases or 5% cash back on dining out would be some examples.
Different cards will offer different cashback rates for different types of purchases. If you rarely eat out you won’t want a cashback card geared towards dining out. If you live in a city and don’t own a car then cashback for fuel also won’t make sense. Certain cards offer a flat rate for every transaction while others have varying rates for different purchases. Choose a card that fits into your lifestyle.
General Travel Rewards Credit Cards
*Pandemic Update: Travel will return one day so you may want to start building travel points now*
General rewards credit cards provide points that can be used for travel at different airlines, hotels, and more. If you don’t have specific loyalties to an airline or hotel chain, general travel points may be a smarter bet than a narrow travel card that only works with a single airline or hotel. Now, every general travel card will work differently so be sure you’re looking at any blackout dates or limitations.
Airline Miles Credit Card
If you travel often through a single airline, a specific airline miles card may be the right choice for you. When you use the card for purchases you earn airline miles or points that can be redeemed for flights, in-flight entertainment or snacks, and more. You’ll earn more points when flying or purchasing from the specific airline the card is through.
Hotel Credit Card
These are very similar to airline cards in that different hotel chains will offer credit cards with points and perks geared towards staying with that specific chain. Earn things like room upgrades, room service, extra points, and additional stays. If you already know where you stay when you travel, it may be a smart idea to get a hotel credit card through your favorite chain.
No Annual Fees Credit Cards
This type of card offers no annual fees just as the name says. It can be a great choice because why should you pay a credit card company every year just for using their card? You shouldn’t. Using a no annual fee card is also a great way to improve the length of your credit history without paying a yearly fee. This is a huge advantage for people with thin or no credit history as you’ll want to keep the cards open to improve the length of your credit history and increase your scores.
Sign-Up Bonus Rewards Credit Cards
Certain credit cards will offer sign-up bonuses for new customers. These can be items like no transfer fees, 0% APR on purchases, no annual fee, extra points for the first 3 months, or more. Credit card companies are all competing for your business so be sure to keep an eye out for any sign-up bonuses that look appealing.
Credit Cards with Intro 0% APR on Purchases
Some credit cards will offer an introductory rate of 0% APR on purchases for a set length of time when you sign up. Offers of this kind typically range from 3 months all the way up to a whopping 20 months depending on the issuing bank or lender. Just be sure you’re paying off the full amount every month because any balances remaining after the set time period expires will likely be rolled over to the new much higher APR %. Be sure you know the length of time and how remaining balances are dealt with prior to going with any 0% introductory APR card.
Balance Transfer Credit Cards
Some credit cards are ideal for transferring your current credit card balance to the new card at a much lower rate. If you’re looking to consolidate your debt and reduce your interest rate, keeping an eye out for a card that offers 0% APR on qualified balance transfers can save you a huge amount of money. Just be sure to see if there is a balance transfer fee and if so, if it’s still worth it to transfer. This is a great tool for people looking to decrease their credit debt right away.
Secured Credit Card
Have no credit or bad credit? No worries. You can still get a credit card and start building up or repairing your credit through a “secured credit card”. It works like this; you make an initial deposit to the lender, who then uses that amount as your credit limit. For example, if you deposit $500 to open a secure card, your spending limit is $500. Secure cards don’t traditionally offer perks or bonuses but they do allow you to get approval and start building your credit history, even if you have poor credit or no credit (credit ghost). Anyone who says “I can’t get a credit card I have terrible credit”, clearly hasn’t heard about a secure card and could be missing an opportunity.
Other Credit Cards
That’s right there are even more credit card varieties than we’ve covered here, but these are the most common and likely will suit your needs. Businesses have different options for business credit cards and so do college students. If you own a business or are a college student looking for a credit card, you can easily find a qualified card to suit your needs.
Our Preferred Credit Card
Not all credit cards or credit card companies are created equal. How do you know you’re getting a good deal? Is the APR % reasonable? What if you are late on a payment? Knowing answers to a few key questions can make a major impact on choosing the right card for you.