When you start looking for a credit card you quickly realize there are a large number of card companies but also a vast array of card types with little to no explanation of what the difference is between them and why you may or may not want a specific type for your needs.
Balance transfer
Balance transfer cards specialize in incentives for those that already have credit cards to transfer those balances to their card with the benefit of low or no APR for qualifying transfers usually for 12-18 months with the idea being its easier pay down the balance if you are not incurring interest charges during the introductory period but function much the same as a standard card after that window.
Low interest
Low interest cards are aimed at consumers with good to excellent credit offering APR below the standard but tend to not offer many additional benefits due to the low interest rate being the big draw.
Cash back
Cash back refers to a credit card perk that gives you a small percent of your money spent back to you usually as an annual check. Cash back offers need to be read carefully as they can have a lot of stipulation that can limit their effectiveness depending on how and where you use your card. Some cards limit the stores you get cash back others limit the type of items or have different percentages back on different types of items. Be aware of how you spend before selecting one of these.
Reward points
These cards are much like the cash back cards in that they reward your spending but instead of cash they assign you points. The points can be used for discounts, to purchase items from loyalty sites and some will redeem for cash or to lower balances. Much like cash back cards you need to read the fine print as all point systems are different and have different rules for how they are accrued and can be used. Again, it’s best to match up the point system with how you spend money.
Hotel and travel points
These cards reward frequent hotel and travel purchases with value-add incentives that make your travels more comfortable and convenient. Rewards include things such as free hotel stays, wi-fi, reduced flight charges, free baggage, even access to special on-site clubs or lounges. A majority of these types of cards are offered by specific hotel chains or airlines so you will need to book with them when you travel to cash in.
Retail rewards
Retail cards reward loyal returning shoppers with discounts, coupons and special offers at the store location or chain.
Gas points
Pretty straight forward, you spend money on gas and for every dollar spent or gallon purchased you receive discounts or reward points to reduce your future purchases or trade in for merchandise.
Airline miles
Cards featuring airline miles will grant you points that can be redeemed for travel discounts or upgrades. Be aware that reward miles are not actual travel miles so it not always clear what your points will get you until you look at the conversion system.
Secured
Secured cards are geared for consumers with no credit history or with some bumps in your credit history. These cards operate like other standard cards and even offer perks but require a small up-front deposit to open the account, usually approximately $200 which most of time is refundable.
Prepaid Cards
Unlike a debit card, prepaid cards are not tied to bank accounts but rather are funded by adding money to an account in advance of spending. Usually you can not spend more than you have in your account which can help curb over spending and incurring overdraft fees.
Business
Business credit cards are focused on business purchases rather than individual consumer use. These cards can help small businesses build a credit profile to improve future barrowing terms.
Student
Student centric cards tend to have low spending limits and not many perks. These cards are intended for students away from parents for the first time that need to build their individual credit history.
With all the different credit card types available its important to get the one that fits your situation and spending habits.
Susan McCullah is an established writer who has created dozens of informative articles about credit scoring, identity theft, budgeting, taxes, debt, and finance. She has worked in the Credit Reporting industry for 15+ years and is FCRA certified. Susan regularly conducts in-person presentations and webinars on the topics of credit scoring formulation, raising credit scores, and identity theft.
