Different types of credit cards

With numerous types of credit cards available, it’s easy to get overwhelmed when deciding on a credit card. But you don’t have to be a credit card whiz to make the right choice. By paying attention to your spending habits, the goals you have and the type of rewards you’d prefer, you can narrow down your choices to find the right card for you.

We’ll show you the basics for each credit card type so you can determine which one fits your lifestyle and budget.

Rewards credit cards

Rewards credit cards are a general category referring to any credit card that offers rewards for your spending. This includes different subtypes of credit cards, including cash back credit cards, travel cards and points cards. While some rewards cards might only offer one option to redeem, many offer flexible redemption options allowing you to redeem your rewards in a variety of ways. Redemption options might include:

• Statement  credit
• Travel purchases
• Direct deposit
• Check
• Gift card

For example, the Bilt Mastercard® offers flexible rewards that can be used toward travel, cash for a home down payment, fitness classes, shopping and more. That means your everyday purchases on these types of credit cards could contribute to covering the cost of new merchandise, a statement credit, your next flight or a gift card. This is especially useful when you know you can pay off your card right away.

Cash back credit cards

Cash back credit cards are one of the simplest ways to earn rewards while you spend. You can redeem the rewards you’ve earned for cash with a transfer to your bank account, or redeem them for a statement credit toward your credit card balance. The rewards structure looks different for each cash back card, but there are a few main ways this works:

• Flat rate on all purchases
• Bonus rates on rotating categories
• Bonus rates on set categories
• Customizable bonus categories

Flat-rate cards are simple to manage and make for a solid base to your credit card stack. But these types of credit cards might not deliver the most robust rewards since there aren’t bonus categories to maximize. One of the best flat-rate cash back credit cards is the Citi Double Cash® Card which offers up to 2 percent cash back (1 percent when you buy and another 1 percent when you pay for your purchases).

If you tend to spend more in categories like groceries, gas or dining, look for a card that offers bonus categories versus a flat rate in the category where you tend to spend the most. Tiered category cards feature set bonus categories, while rotating category cards change bonus categories periodically. Both can be extremely useful when a large portion of your spending happens within those higher bonus categories.

However, keeping up with the rotating categories can be a hassle, and the categories may not always align with your spending. For more control over which categories you earn the most in, there are cash back credit cards, like the Bank of America® Customized Cash Rewards credit card, that allow you some choice when it comes to your bonus categories.

Many of the best cash back credit cards come with no annual fee. However, those with more generous bonus offers and rewards schemes charge modest annual fees — usually under $100 — where the benefits typically outweigh the cost. A notable example is the Blue Cash Preferred® Card from American Express, which charges a $95 annual fee after your first year, but earns 6 percent cash back on U.S. supermarket purchases (up to $6,000 spent annually, then 1 percent), among other high-earning opportunities.

Travel credit cards

Travel credit cards are a type of credit card offering rewards designed for frequent travelers or if you prefer to use rewards for travel, including for flights, rental cars and hotels. With these cards, you can earn flexible credits that can be used toward any travel purchase or points you can then transfer to airline or hotel loyalty programs.

Typically, these cards offer rewards by using “points” or “miles.” In some cases, what the rewards are called isn’t important. For instance, the Capital One Venture Rewards Credit Card awards “miles,” but you can think of these rewards as “points” since they can be redeemed for everything from flights to RV rentals and more. “Miles” doesn’t mean airline miles in this case, but simply travel rewards.

When you want the flexibility to redeem your credit card rewards for just about anything, a points credit card is likely a good fit for you. Some travel credit cards also let you earn points within a specific program, such as a frequent flyer program or hotel loyalty program. Whether you’re traveling for business or pleasure, you may find luxury travel perks with these types of credit cards, like airport lounge access, annual travel credits or reimbursement for Global Entry or TSA PreCheck®.

You don’t even have to leave town to start earning points and miles that can make your next trip more affordable. The best travel credit cards let you earn rewards through everyday purchases. A few examples include:

• Capital One VentureOne Rewards Credit Card – Best for flat-rate rewards
• Chase Sapphire Preferred® Card – Best starter travel card
• American Express® Gold Card – Best for travel rewards on dining
• Discover it® Miles – Best for first-year miles bonus

Business credit cards

Business credit cards allow cardholders to keep their personal and business expenses separate, and many also allow business owners to earn rewards on their business spending. Like personal rewards cards, business credit cards can be different types of credit cards, such as cash back, travel, points or even secured credit cards. To get this type of credit card you must own a business or income-producing activity, though many kinds of gig work and side hustles would qualify as “businesses.”

The best business credit cards help you benefit from your everyday spending and make running your business easier by freeing up cash flow. When considering the different types of credit cards for your business, look for one with the following benefits:

• A generous rewards program
• Expense tracking abilities
• Features that can help boost your bottom line

Some business credit cards, like the Ink Business Unlimited® Credit Card, offer a flat rewards rate for all purchases, whereas other cards offer bonus rewards on different categories of expenses, such as travel or internet services. When it comes to redeeming your rewards, business credit cards generally let you exchange your rewards for either cash back or travel.

Corporate Credit Cards

Corporate credit cards are a step up from business credit cards since they’re meant for established businesses that bring in millions in revenue and have multiple employees. While these types of credit cards don’t require a personal guarantee, you’ll typically have to go through a lengthy application process and have substantial bank balances to qualify for one.

If your business qualifies for one of the best corporate cards, you could reap some hefty rewards for your business spending. For example, the Brex Card* offers up to 8X points on eligible purchases for daily payments and 7X points on eligible purchases for monthly payments, which you can redeem in a variety of ways.

Student credit cards

Student credit cards are like “starter” credit cards designed for young people with limited or no credit history. However, anyone enrolled in a two- or four-year institution is eligible to apply. Application requirements for these cards aren’t as strict, making approval easier than for a traditional credit card. Most of the best student credit cards don’t charge an annual fee, and many offer rewards for each dollar you spend or even bonus perks for good grades.

If used responsibly, signing up for one of the best student credit cards can help people build credit and establish healthy financial habits. Some popular student credit card examples include:

• Discover it® Student Cash Back – Best student card for rotating cash back bonus categories
• Capital One Quicksilver Student Cash Rewards Credit Card – Best student card for rewards on everyday purchases

Secured credit cards

When you need to build credit from scratch, a secured credit card can be a stepping stone to unsecured credit —meaning you don’t have to put down money upfront for collateral.

With secured credit cards, on the other hand, you’re required to make a cash deposit to secure a small line of credit. For example, you might sign up for a secured credit card and put down a $500 initial deposit in order to receive a $500 line of credit. Putting down collateral might not be ideal, but it’s helpful when you need to build or repair your credit after a financial hurdle. Here are some popular secured credit cards to consider:

• Capital One Platinum Secured Credit Card – Best secured card for building credit
• OpenSky® Secured Visa® Credit Card – Best secured card with no minimum credit score requirement
• Discover it® Secured Credit Card – Best secured card with rewards

Co-branded credit cards

Co-branded credit cards are store or brand credit cards offered through traditional card issuers like Chase, Citi or American Express. Card issuers then partner with retail stores, airlines or hotels to offer different types of credit cards which reward loyalty to that brand.

Generally, the rewards earned through co-branded credit cards are limited to one brand even though the card can be used anywhere. While redemptions are often limited to a particular brand, the value of rewards and perks — like free hotel nights — could end up being worth more than cash back.

Airline credit cards

Airline credit cards let you earn rewards within a specific frequent flyer program attached to a certain airline. So when you use it for everyday purchases, you accumulate points or miles toward your next flight. These co-branded cards also come with handy benefits like priority boarding, airport lounge access, companion tickets or free checked bags, which can help lower your travel costs and elevate your next trip.

If you’re a Southwest loyalist, for example, one of the best airline cards for you could be the Southwest Rapid Rewards® Priority Credit Card. It offers an annual travel credit, upgraded boarding and 25 percent back on inflight purchases.

Hotel credit cards

Hotel credit cards let you earn points within a hotel loyalty program and allow you to earn extra rewards by booking your hotel stay with that card or through everyday purchases. These credit cards often carry lucrative welcome offers and come with valuable incentives like:

• Free hotel nights
• Late check out
• Room upgrades
• Complimentary breakfast

The Marriott Bonvoy Brilliant® American Express® Card, for example, offers Priority Pass lounge access, free night rewards, a Marriott Bonvoy property credit and a monthly dining credit as some of its perks.

Store credit cards

Store credit cards, or retail cards, are offered through retail stores to let consumers charge their purchases and pay them off over time. Store credit cards are generally used only at the specific store offering them, although some store credit cards can be used within a family of stores.

Some store credit cards are co-branded and open-loop, meaning you can use the card anywhere the card processor (Visa, Mastercard or American Express, for instance) is accepted. Other retail cards are closed-loop, which means you can only use the card for purchases with that store or brand.

Generally, store-branded credit cards have higher interest rates than general-purpose cards, and they are often more likely to charge deferred interest. That said, you may be able to take advantage of useful perks and rewards programs if you’re certain you can pay off your store credit card on time.

0 percent APR/balance transfer cards

Zero percent introductory APR cards and balance transfer credit cards are useful tools when you’re looking to pay down debt or make a large purchase and pay it off over time. These types of credit cards allow cardholders to carry a balance without accruing interest on either purchases, balance transfers or both for a set period of time, usually between 12 and 21 months. After the 0 percent introductory APR period is over, the card’s regular APR will kick in.

These cards don’t always have strong rewards programs, but you could view that as a positive feature to keep you focused on your goal of paying off credit card debt.

What type of credit card should I choose?

To make the decision a bit easier, you can start narrowing down your choices with Bankrate’s CardMatch™ tool for personalized matches that fit your credit profile without the hard credit check. Ultimately, choosing the right credit card for you depends on a few factors that are highly personal, including:

• Which credit cards do you currently have?
• What type of rewards do you prefer?
• What are your goals?
• How are you currently using your credit cards?
• Where does your credit score stand?

By getting clear on what you need and want, you may find it easier to make a decision that fits your goals and lifestyle. For instance, if you’ve analyzed your spending and know you swipe the most for groceries and dining out, then you’d want to go for a credit card with high rewards for those types of purchases. Then you’d decide how you want to be rewarded, whether that’s with straight cash back, airline miles or flexible points, for instance.

The bottom line

You’ll find several types of credit cards on the market, and choosing the best credit card for yourself depends on your specific needs, your credit situation and even what stage of life you’re in. Even more, the timing of your credit card selection can also affect which option might be best. The card best for you is the one that offers a combination of rewards, benefits and other features that can help improve your financial situation.

*Information about the Brex Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the card issuer.

The Bank of America content in this post was last updated on 11.11.2024.