What Are the Different Types of Credit Cards?
If you’re at the beginning of your search for a credit card, you may be overwhelmed by the hundreds of card offers available online. One of the best ways to whittle down your options is to identify why you are looking for a credit card and figure out the type of credit card that’s best for you. For example: Are you looking to build a credit history? Look for a credit card for building credit. Are you aiming to earn free flights or hotel stays? You should focus on travel credit cards.
Some of the main types of credit cards include cash back, travel, balance transfer, business and more. Many types of credit credit cards overlap. A cash back credit card may also have a 0% introductory APR for purchases or balance transfers Or, a credit card for building credit may include cash back rewards. When choosing a credit card, it’s important to consider the type of card plus its other features and benefits.
Cash back credit cards
Cash back credit cards are credit cards that offer a percentage of cash back on every purchase you make. There are three main ways cash back credit cards can structure their rewards rate.
- Flat-rate cash back credit cards earn the same cash back rate on everything
- Tiered cash back credit cards offer a bonus rate on some categories, like dining or groceries
- Rotating cash back credit cards give you a bonus rate (usually 5%) that switches categories every quarter
Cash back rewards are usually much simpler to redeem than travel credits, since most cards offer them in the form of statement credits on your card bill. Some examples of cash back cards include:
- Wells Fargo Active Cash® Card (flat-rate)
- Capital One Savor Cash Rewards Credit Card (tiered)
- Discover it® Cash Back (rotating categories)
Best cash back credit cards of 2024
Who are cash back credit cards best for?
Cash back credit cards are best for people who are looking for simple rewards or who don’t travel much.
Travel credit cards
Travel credit cards are cards that can have airlines and hotels as redemption options, helping travelers earn free flights and stays. They are both general and co-branded cards — general cards being those that are flexible and aren’t tied to a hotel or airline brand, while co-branded ones are.
You can either earn points or miles with travel cards. While the terms are often used interchangeably, points usually refer to hotel rewards or flexible rewards that can be redeemed at different hotel or airline brands, while miles refer to airline rewards.
Travel cards generally fall into one of three subtypes:
- General travel cards: Travel credit cards that earn rewards that can be used with multiple airline and hotel brands
- Airline travel cards: Co-branded credit cards that can earn rewards for a specific airline
- Hotel travel cards: Co-branded credit cards that can earn rewards for a specific hotel brand
Since these cards can have many different redemption options, including sometimes the ability to transfer points to other rewards programs, they can be more complicated to use. But once you learn how to use these cards’ benefits, you can save a ton on travel. Examples of travel credit cards include:
- Chase Sapphire Preferred® Card (general travel card)
- United Quest℠ Card (airline card)
- Marriott Bonvoy Boundless® Credit Card (hotel card)
Best travel credit cards of 2024
Who are travel credit cards best for?
Travel credit cards are best for people who travel often — or even occasionally. The type of travel credit card you get should depend on how much you travel. For example, if you’re a serious traveler, a card that offers benefits like airport lounge access, TSA PreCheck or Global Entry or hotel and airline credits is a good option. If you’re more of a casual traveler, there are cards with low or no annual fees but fewer benefits to suit your needs.
Rewards credit cards
Rewards credit cards are an umbrella term for travel or cash back cards, since they both earn rewards. You don’t have to own cash back or travel cards exclusively. Many people own both types of cards to maximize their rewards.
For example, if you have a points-earning card from Chase, like the Chase Sapphire Reserve®, you can use a cash-back earning card, like the Chase Freedom Unlimited®, to earn even more points.
Some more examples of rewards cards are:
- Capital One Venture X Rewards Credit Card (travel card)
- Citi Double Cash® Card (cash back card)
- American Express® Gold Card (travel card)
Best rewards credit cards of 2024
Who are rewards credit cards best for?
Rewards credit cards are best for people who have good credit, since many valuable rewards cards require a high score. If you need to improve your credit, a credit card for building credit can be a great choice — however, they may not offer rewards.
Business credit cards
Business credit cards are cards designed for business owners, and will typically have “business” in the name. A business credit card allows you to keep your business and personal expenses separate, offers useful account management tools and may even offer cards for your employees (often for free).
There’s a wide variety of both cash back and travel credit cards for businesses. If you or your employees travel often, then you may want to go get a business travel credit card. But if traveling isn’t part of your business, then you can likely find more value in cash back cards.
Some business cards are technically charge cards, which means you can’t carry a balance on them from month to month. Before you choose a charge card, make sure your business can afford to make your monthly payment in full. Some examples of business cards include:
- Capital One Spark Cash Plus (charge card)
- The Business Platinum Card® from American Express (business travel card)
- Ink Business Cash® Credit Card (business cash back card)
Best business credit cards of 2024
Who are business credit cards best for?
Business credit cards can be beneficial for any type of business owner, whether you’re a sole proprietor or large-scale business. There are business credit cards designed for both large and small businesses, so you don’t have to pay big annual fees or spend over $10,000 to earn a sign-up bonus.
Student credit cards
Student credit cards are meant for students actively enrolled in college. These can be an excellent first credit card, since they’re usually accessible to people with little or no credit. Plus many offer excellent cash back or travel rewards programs, which is rare for cards designed for building credit. When you graduate, some issuers will automatically upgrade your student card to a similar non-student card so you don’t have to apply for another one right away.
Some student credit card options are:
- Discover it® Student Cash Back (cash back)
- Capital One Savor Student Cash Rewards Credit Card (cash back)
- Discover it® Secured Credit Card (secured credit card)
Best student credit cards of 2024
Who are student credit cards best for?
Student credit cards are best for those in college trying to build credit. These should be your first option rather than secured credit cards. Secured credit cards are also a great choice for building credit in college — however, they usually require security deposits upfront of at least $200.
Balance transfer credit cards
Balance transfer credit cards — often referred to as 0% APR cards — allow you to transfer a balance from one card, usually with a high APR, to another one with a 0% APR for a limited time. Introductory APRs usually last between 12 to 24 months. An applicant may want to transfer an existing balance, or they may want to pay off an expensive purchase, like furniture or technology.
Balance transfer cards usually have a balance transfer fee. They can range from 3% to 5% of the amount you want to transfer. There are credit cards with no balance transfer fee, but they often limit who can apply to them. Some balance transfer cards include:
- Citi Simplicity® Card (balance transfer fee)
- First Tech Choice Rewards World Mastercard® (no balance transfer fee)
- Wells Fargo Reflect® Card (balance transfer fee)
Best balance transfer credit cards of 2024
Who are balance transfer credit cards best for?
Balance transfer credit cards are best for people who are having trouble paying off debt from a high-interest credit card. Doing a balance transfer won’t get rid of your debt, but it can help you pay it down faster and keep it from snowballing into a much higher balance.
Credit cards for building credit
Credit cards to build credit are typically no-frills, simple cards to help you build a payment history. They can help you build your credit history by reporting your payments to all three credit bureaus: Equifax, Experian and TransUnion.
These cards typically come in two types:
- Secured credit cards or typically require you to put down a security deposit of at least $200. Your credit limit depends on your security deposit. It can be more, depending on how much you put down.
- Unsecured credit cards for building credit don’t require a security deposit, but may charge you annual or other fees.
Here are a few examples of both types of cards:
- Capital One Platinum Credit Card (no security deposit required)
- Discover it® Secured Credit Card (minimum security deposit: $200)
- Capital One Quicksilver Secured Cash Rewards Credit Card (minimum security deposit: $200)
Best credit cards to build credit of 2024
Who are credit cards for building credit best for?
Credit cards for building credit are best for people who are either new to credit or trying to rebuild a shaky credit history. In order to use a credit card to build your credit score up, you’ll have to make each payment in full and on time.
How to choose the right type of credit card
Choosing the right credit card for you can seem overwhelming with so many options. Considering your financial situation, your credit goals and your spending habits can make the process less of a burden.
1. Decide how you plan to use the card
Is your goal for getting a credit card to get free travel? Or just save on your everyday spending? Think about what your goals are — whether it’s to earn rewards or build credit — then look into the best cards to reach that goal.
2. Decide on a business vs. personal card
Deciding whether you’d like a personal or business credit card can help you eliminate plenty of options fast. You don’t need to run a brick-and-mortar business to have a business credit card. Anybody could apply for one — even without an Employer Identification Number (EIN) — keep in mind that business credit cards can come with high annual fees and high spending thresholds to earn a sign-up bonus.
3. Find out your credit score
Check your credit score before applying for a card to get an idea of what kinds of cards you have a good chance of getting approved for. If it’s a high-end travel card, you likely won’t get approved with a poor credit score.
Your FICO® Score and VantageScore, the two main credit scoring systems that issuers consider, can be broken down into tiers:
| FICO® Score | Vantage Score |
|---|---|
| Poor: 300-579 | Very poor: 300-499 |
| Fair: 580-669 | Poor: 500-600 |
| Good: 670-739 | Fair: 601-660 |
| Very good: 740-799 | Good: 661-780 |
| Exceptional: 800-850 | Excellent: 781-850 |
If you’re below “Good” in either score, then you may need to consider a secured credit card to build credit.
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4. Look at where you spend the most
Reviewing what types of things you spend more on can help you find rewards that will maximize your earnings. For example, if you spend a lot on dining, groceries, gas, travel or entertainment, you can look for cards that offer elevated rewards for those categories.
If you don’t spend on any categories consistently, then a flat-rate 1.5% or 2% cash back card might be just as valuable to you.
5.Consider how much credit card debt you have
If you have credit card debt that’s impacting your credit score, then you may want to hold off on applying for a credit card — or at least have a plan to tackle it. That may include getting a balance transfer credit card. In any case, chip away at the debt you have to improve your score and boost your chances at getting approved for your next card.
6. Decide where you’re most likely to use rewards
If you’re an avid traveler, then narrowing down your search to travel credit cards can likely help you. You’ll want to look at the different tiers and annual fees of travel credit cards to find out which cards you can get the most value out of.
If you’re not much of a traveler and prefer the simplicity of earning rewards as statement credits, then it makes more sense to search through cash back credit cards instead.
7. Budget for an annual fee
Deciding beforehand how much you’re willing to spend on a credit card annual fee, or if you’d rather have a no-annual-fee credit card, can help you with your search process. In many cases, issuers will offer a group of cards at varying annual fees with key similarities — but more benefits for the higher-annual-fee cards.
If the cards you’re interested in do have an annual fee, make sure that the rewards and benefits will help you make up for it.
Frequently asked questions
Credit cards do impact your credit score. There are five factors that affect your FICO score: payment history (35%) amounts owed (30%), length of credit history (15%), new credit (10% and credit mix (10%),
Consistently making credit card payments on time and keeping your credit utilization ratio low can significantly boost your score. But missing even one payment can lower your credit score by as much as 180 points.
The best type of credit card for you depends on your spending habits, credit score and rewards preferences. If you’re looking to build credit, look into a secured credit card or a student credit card.
If your credit is in good shape, then you have a larger variety of options to choose from, like travel credit cards and cash back credit cards. How much you travel can help you decide whether to choose a travel or cash back card.
Yes, your credit card will accrue debt whenever you make a purchase with it. However, if you pay off the balance every month, then this debt won’t affect your credit score.
There’s no single best type of credit card. The best type of credit card for you depends on your credit goals — whether you want to build credit with a $0-annual-fee card like the Discover it® Secured Credit Card or redeem luxury travel rewards with a $695-annual-fee card like the The Platinum Card® from American Express.
For Capital One products listed on this page, some of the above benefits are provided by third parties such as Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as certain terms, conditions, and exclusions apply.
The information related to the Wells Fargo Active Cash® Card, Discover it® Cash Back, Marriott Bonvoy Boundless® Credit Card, American Express® Gold Card, The Business Platinum Card® from American Express, Discover it® Student Cash Back, Discover it® Secured Credit Card, Wells Fargo Reflect® Card and The Platinum Card® from American Express has been collected by LendingTree and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply.
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