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If you're in the market for a new credit card, it helps to know the different types available. Understanding the unique rewards, perks, and benefits that come with each card can help you pick the best option for you.
This guide will help you navigate the world of credit cards, whether you're looking to earn cash back, travel the world, or build your credit.
The nine most common types of credit cards are:
- Rewards credit cards
- Cash back credit cards
- Travel credit cards
- Balance transfer credit cards
- Credit builder cards
- Secured credit cards
- Student credit cards
- Business credit cards
- Store credit cards
1. Rewards credit cards
Rewards cards encompass various cards offering points, miles, or cash back. These cards allow you to earn valuable rewards that you can redeem for travel, merchandise, gift cards, or statement credits. Cash back cards and travel cards are two common types of rewards cards.
Cash back cards offer a percentage of cash rewards on your purchases. Points-based rewards cards offer a flexible currency that can be redeemed in several ways. Miles-based rewards cards are like points-based cards but typically focus on travel redemptions.
Pros
- Earn valuable rewards on everyday spending
- Flexible redemption options
- Often offer sign-up bonuses and ongoing perks
Cons
- May charge annual fees
- Rewards can sometimes be complex to understand and redeem
- Higher interest rates than non-rewards cards
2. Cash back credit cards
Cash back cards are some of the most popular cards out there. They offer a straightforward way to earn rewards on everyday purchases.
These cards often don't have an annual fee and are often easier to qualify for than travel rewards cards. Some may offer a sign-up bonus after meeting spending requirements.
There are three types of cash back cards — flat-rate cash back, tiered cash back, and rotating cash back.
Pros
- Flexible redemption options
- Usually, there is no annual fee
- May offer 0% APR introductory periods
- Provide standard credit card protections
- Simple to understand, earn, and redeem rewards
Cons
- Limited perks compared to premium cards
- May require excellent credit for the best offers
Flat-rate cash back cards
Flat-rate cash back credit cards offer a consistent rewards rate on all purchases. With these cards, you’ll earn a percentage of cash back on your purchases, typically ranging from 1%-6%.
These cards generally don't have a limit on the rewards you can earn. These cards are meant for those who want simple, hassle-free cash back.
“If you’re just getting started, a simple cash back rewards structure may be what you’re after, so you don’t have to keep up with rotating categories and point conversions,” says Matt Bundrick, co-founder of BankBonus.com, a credit card benefit optimization website.
Examples of flat-rate cash back cards include:
- Citi Double Cash® Card
- Wells Fargo Active Cash® Card
Category-based cash back cards
Category-based cash back cards offer higher reward rates in certain categories, such as groceries, gas, or dining. But some cards have a spending cap on how much-elevated rewards you can earn. After, you'll earn the base rate (typically 1%) on additional purchases.
While these cards allow you to maximize rewards in certain categories, they aren't best for everyone. If you have varied spending or want to earn a higher base rate, you may want to consider a flat-rate card.
Examples of category-based cash back cards include:
- Chase Freedom Unlimited®
- Blue Cash Preferred® Card from American Express
- Capital One SavorOne Cash Rewards Credit Card
Rotating category cash back cards
Rotating category cash back cards offer higher rewards on categories that change quarterly.
The credit card issuer typically determines these bonus categories. You typically have to activate the category to start earning the higher rate.
These cards often have a quarterly spending cap for the bonus categories. For example, a card may offer 5% cash back on up to $1,500 in purchases in a specific category each quarter, allowing you to earn a maximum of $75 in bonus cash back per quarter.
Popular rotating category cash back cards include:
- Citi Custom Cash® Card
- Chase Freedom Flex℠
3. Travel credit cards
Travel rewards cards allow you to earn points or miles to be redeemed for flights, hotels, rental cars, and other travel expenses. These cards often offer generous sign-up bonuses, valuable perks, and high earning rates.
Travel rewards cards work much like cash back cards. Some cards offer a flat-rate earnings structure, while others have tiered rewards, offering bonus rewards for specific categories. While rewards are more complicated than cash back cards, they can be much more valuable.
With a travel card, you'll typically earn bonus rewards on travel expenses. Depending on the card, additional bonus-earning categories could include dining, groceries, and more.
There are a few different types of travel cards: Airline cards, hotel cards, and general travel cards.
Pros
- Often offer large sign-up bonuses
- Offer lucrative reward rates
- Provide valuable travel credits and perks
- May offer lounge access and elite status benefits
- Come with travel protections like rental car insurance
Cons
- Typically, they require very good to excellent credit to qualify
- Usually charge an annual fee
- Some benefits may be difficult to use
- Redeeming rewards can be complex
Flexible travel cards
General travel cards offer more flexibility in earning and redeeming points or miles. You can use rewards to book travel via the card issuer's portal or transfer to airline or hotel partners. You can often redeem rewards in other ways, like a statement credit, gift cards, shopping discounts, and more.
Premium travel rewards cards may offer substantial travel credits, lounge access, Global Entry or TSA PreCheck credits, and other high-end perks. However, these cards often come with higher annual fees.
Examples of popular general travel rewards cards include:
- Chase Sapphire Preferred® Card
- Capital One Venture Rewards Credit Card
- The Platinum Card® from American Express
Airline credit cards
Airline cards are co-branded with specific airlines, allowing you to earn miles and enjoy perks with that particular airline. Benefits may include free checked bags, priority boarding, lounge access, companion tickets, and elite status perks.
Airline cards are best suited for those loyal to a specific airline. Before applying, it’s essential to compare redemption rates and benefits, as some airline cards may not offer the best value for your needs.
Examples of airlines that offer co-branded credit cards include:
- Delta
- United Airlines
- American Airlines
- Alaska Airlines
Hotel credit cards
Hotel credit cards are designed to encourage loyalty to a specific hotel chain. These cards offer benefits like elite status, room upgrades, free nights, and other perks. Many hotel cards also offer free night awards yearly, which can easily justify the annual fee.
Popular hotel chains with co-branded credit cards include:
- Marriott Bonvoy
- Hilton Honors
- World of Hyatt
4. Balance transfer credit cards
Balance transfer credit cards allow you to transfer high-interest debt from other cards to a new card with a 0% APR promotional period. You’ll then pay off your balance during the introductory period, ranging from 12-21 months. This can help you save on interest charges and pay your debt faster.
After the introductory period, any remaining balance is subject to the card's regular APR.
To take advantage of a balance transfer, you'll often need to start the transfer within a few months of opening the new card. Remember that most balance transfer cards charge a fee between 3%-5% of the transferred amount.
Examples of popular balance transfer cards include:
- Citi Simplicity® Card
- Wells Fargo Reflect® Card
- Chase Slate Edge℠
Balance transfer cards are best for those with good credit who are committed to paying off their debt during the promotional period.
Pros
- Offer 0% APR introductory periods, some as long as 21 months
- It can help you save on interest and pay off debt faster
- Usually, don't charge an annual fee
Cons
- Typically, don't offer a sign-up bonus
- Balance transfers must be completed within a limited time frame
- Charge balance transfer fees (3-5% of the transferred amount)
- May not offer competitive rewards or perks
5. Credit-builder cards
Credit-builder cards are meant for those with limited or no credit history who want to establish or improve their credit score.
These cards often have lower credit limits and may require a security deposit. They report your payment activity to the major credit bureaus, helping you build a positive credit history.
Some credit-builder cards offer rewards or the opportunity to upgrade to an unsecured card.
Credit-builder cards are best for those starting their credit journey or recovering from past credit mistakes.
Examples of credit builder cards include:
- Petal® 2 “Cash Back, No Fees” Visa® Credit Card
- Capital One Platinum Credit Card
- OpenSky® Secured Visa® Credit Card
Pros
- Help establish or improve credit history
- Often have lower credit requirements than other cards
- May offer a path to higher credit limits or unsecured cards
Cons
- Typically, they have low credit limits
- May charge annual fees or high interest rates
- Limited rewards and perks
6. Secured credit cards
Secured credit cards are a great way to build credit. They’re easier to qualify for than non-secured credit cards. Some secured cards don’t require a credit check at all.
These cards require a cash deposit that serves as collateral, which equals the credit limit.
The best secured credit cards don't charge an annual fee. Your credit score will slowly improve as you make on-time payments and keep your balance low. Some issuers may even offer to upgrade you to an unsecured card after a period of responsible use.
Examples of secured credit cards include:
- Discover it® Secured Credit Card
- Capital One Platinum Secured Credit Card
- Capital One Quicksilver Secured Cash Rewards Credit Card
Pros
- Easier to qualify for than unsecured cards
- Help build credit with responsible use
- May offer a path to an unsecured card
Cons
- Require a security deposit
- Typically, they have low credit limits
- May charge high interest rates
- Often lack rewards and perks
7. Student credit cards
Student credit cards cater to college students who are beginning their credit journey. These cards often have lower credit limits and fewer perks, but they also have more relaxed credit requirements and generally don't charge annual fees.
Some student credit cards offer cash back rewards, allowing you to earn money back on your purchases while building your credit. You may even be able to access special perks for good grades.
Examples of student credit cards include:
Still, it’s possible to get a solid cashback card as a student. Here are a few examples.
- Capital One Quicksilver Student Cash Rewards Credit Card
- Bank of America® Travel Rewards for Students
Pros
- Easier to qualify for than other cards
- Usually, don't charge an annual fee
- Can help establish a credit history
Cons
- Low credit limits
- May have high interest rates
- Limited perks and rewards
8. Business credit cards
Business credit cards help small business owners and entrepreneurs build business credit and separate business and personal expenses.
These cards often offer rewards on common business expenses, such as office supplies, advertising, and travel. They may include benefits like expense tracking tools, employee cards, and higher credit limits.
Examples of business credit cards include:
- Ink Business Preferred® Credit Card
- American Express® Business Gold Card
- Capital One Spark Cash Plus
Pros
- Earn rewards on business expenses
- Offer expense tracking and management tools
- Provide employee cards and spending controls
Cons
- May require a personal guarantee
- Often have higher credit requirements than personal cards
- Annual fees can be substantial
9. Store credit cards
Store credit cards are offered by retailers. They can often only be used for purchases at that specific store or brand.
These cards often have lower credit requirements and offer discounts, rewards, or special financing options. However, they typically have high interest rates and low credit limits.
Store cards are best for loyal customers who frequently shop at a particular retailer and can take advantage of the discounts and perks.
Examples of store credit cards include:
- Prime Visa
- Target Circle™ Credit Card
- Capital One® Walmart Rewards™ Mastercard®
Pros
- Easier to qualify for than other cards
- Offer discounts and rewards at the associated store
- May provide special financing options
Cons
- High interest rates
- Low credit limits
- Limited usability (can only be used at the associated store)
Frequently asked questions about credit cards
What credit score do I need to qualify for a rewards credit card?
Generally, you'll need a good to excellent credit score (670 or higher) to qualify for most rewards credit cards. However, some cards, like secured cards or credit-builder cards, may not require a credit score to apply.
Can I have multiple credit cards?
Yes, you can have multiple credit cards. However, it's essential to manage them responsibly and avoid taking on more debt than you can handle. Multiple cards can also help you maximize rewards and take advantage of different perks.
What's the difference between a credit card and a debit card?
A credit card allows you to borrow money from the card issuer to make purchases, which you repay later. A debit card, on the other hand, is linked to your checking account and uses your own money for purchases.
How do I choose the best credit card for me?
To choose the best credit card for you, consider your spending habits, financial goals, and credit score. Look for a card with rewards or perks that align with your lifestyle and fees and interest rates that fit your budget.
What should I do if I'm having trouble qualifying for a credit card?
If you're having trouble qualifying for a credit card, consider applying for a secured credit card or credit-builder card. These cards can help you establish or rebuild your credit history, making qualifying for other cards in the future easier.
The bottom line
Choosing the right credit card depends on your spending habits and finances. Whether you're looking to earn cash back, travel rewards, build credit, or pay down debt, there's a card that can help you achieve your goals.
As you compare different credit cards, consider rewards rates, annual fees, interest rates, and perks. Don't be swayed by flashy offers or sign-up bonuses alone. Instead, focus on finding a card that aligns with your long-term financial strategy.
“At the end of the day, take a good look at what perks you value the most and what your end goals are for getting the card,” says Bundrick.
Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.
Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.
Meet the contributor:
Sandy John
Sandy John is a former newspaper business journalist who specializes in writing about personal finance topics such as mortgages, homebuying and home ownership, credit, and insurance.
