Different types of credit cards

With a wide variety of credit cards available and an extensive range of rewards, choosing the right credit card can be overwhelming. However, you don’t have to be an expert to make the right choice. By understanding your spending habits, goals, and preferred rewards, you can easily identify the most suitable type of credit card and then narrow down your options.

Selecting the perfect credit card doesn’t have to be complicated. We will guide you through the basics of each credit card type so you can determine which one aligns with your lifestyle and financial situation.

Rewards credit cards

Rewards credit cards encompass any credit card that offers rewards for your spending. This category includes cash back credit cards, travel cards, and points cards. Some credit cards also provide flexible redemption options, allowing you to redeem rewards in various ways.

For example, the Bilt Mastercard® offers versatile rewards that can be used for travel, cash towards a home down payment, fitness classes, shopping, and more. This means that everyday purchases on these cards can contribute to covering expenses for a range of items or services. This is especially beneficial if you can pay off your card balance promptly.

Cash back credit cards

Cash back credit cards are a straightforward way to earn rewards while making purchases. You can redeem the cash back you’ve earned for a direct transfer to your bank account or as a statement credit towards your credit card balance. The rewards structure varies for each cash back card, with common methods including:

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

Flat-rate cards offer simplicity and serve as a solid foundation for your credit card portfolio. However, these cards may not provide the most robust rewards since they lack bonus categories. The Citi Double Cash® Card is one of the top flat-rate cash back credit cards, offering up to 2 percent cash back (1 percent when you make a purchase and an additional 1 percent when you pay for it).

If you tend to spend more in certain categories like groceries or dining, consider a card that offers bonus categories rather than a flat rate. Tiered category cards feature set bonus categories, while rotating category cards change bonus categories periodically. Both types can be advantageous if a significant portion of your spending falls within those higher bonus categories.

However, keeping track of rotating categories can be cumbersome, and they may not always align with your spending habits. For more control over your bonus categories, look for cash back credit cards like the Bank of America® Customized Cash Rewards credit card, which allows you to choose your bonus categories.

Many of the best cash back credit cards come with no annual fee. However, cards with more generous bonus offers and rewards programs may have modest annual fees—usually under $100—where the benefits typically outweigh the costs. The Blue Cash Preferred® Card from American Express, for instance, charges a $95 annual fee after the first year but earns 6 percent cash back on groceries (up to $6,000 spent annually, then 1 percent), among other lucrative opportunities.

Travel credit cards

Travel credit cards are designed for frequent travelers, offering rewards tailored to their needs. With these cards, you can earn flexible credits that can be used for any travel purchase or points that can be transferred to airline or hotel loyalty programs.

These cards provide rewards in various forms, with “points” or “miles” being the most common. In some cases, the specific name of the rewards is less important. For example, the Capital One Venture Rewards Credit Card provides “miles,” but these rewards can be thought of as “points” since they are redeemable for flights, RV rentals, and more. In this context, “miles” refers to travel rewards rather than airline miles.

If you prefer the flexibility to redeem your rewards for various purposes, a points credit card may be ideal for you. Some travel credit cards also allow you to earn points within a specific program, such as a frequent flyer or hotel loyalty program. Whether you travel for business or leisure, you may enjoy luxury travel perks with these cards, such as airport lounge access, annual travel credits, or reimbursement for Global Entry or TSA PreCheck.

You can start earning points and miles for your next trip without leaving town by using the best travel credit cards for everyday purchases. Some examples include:

• Capital One Venture Rewards Credit Card – Best for flexible travel 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 individuals to separate their personal and business expenses, and many also enable business owners to earn rewards on their business spending. Like personal rewards cards, business credit cards come in various types, including cash back, travel, points, or secured credit cards. To qualify for a business credit card, you must own a business or engage in income-producing activities, which can include gig work or side hustles.

The best business credit cards help you maximize your everyday spending and streamline your business operations by improving cash flow. When exploring different business credit card options, look for cards that offer the following benefits:

• A generous rewards program
• Expense tracking capabilities
• Features that enhance your bottom line

Some business credit cards, such as the Ink Business Unlimited® Credit Card, provide a flat rewards rate for all purchases, while others offer bonus rewards on specific categories like travel or internet services. When it comes to redeeming your rewards, most business credit cards allow you to exchange them for cash back or travel rewards.

Corporate Credit Cards

Corporate credit cards are designed for established businesses with substantial revenue and multiple employees. Unlike business credit cards, corporate cards do not require a personal guarantee, but they typically involve a rigorous application process and require significant bank balances to qualify.

If your business meets the requirements for a top corporate card, you could enjoy substantial rewards for your business spending. For example, the Brex Card* offers up to 8X points for daily payments and 7X points for monthly payments, which can be redeemed flexibly.

Student credit cards

Student credit cards serve as entry-level credit cards for young individuals with limited or no credit history. These cards have lenient application requirements, making approval easier than traditional credit cards. Most of the best student credit cards do not charge an annual fee, and many offer rewards for each dollar spent or bonus perks for good academic performance.

By responsibly using one of the top student credit cards, individuals can establish credit and develop healthy financial habits. Popular student credit card options 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

Secured credit cards are ideal for building credit from scratch and serve as a stepping stone to unsecured credit, eliminating the need for upfront collateral.

With secured credit cards, you are required to make a cash deposit to secure a small line of credit. For instance, you might apply for a secured credit card and deposit $500 to receive a $500 line of credit. While providing collateral may not be ideal, it can be beneficial for building or repairing credit after facing financial challenges. Consider these popular secured credit card options:

• 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 offered through traditional card issuers like Chase, Citi, or American Express in partnership with retail stores, airlines, or hotels. These cards reward loyalty to a specific brand, with rewards typically limited to that brand despite being usable anywhere. While redemptions are often restricted to a particular brand, the value of rewards and perks—such as free hotel nights—can outweigh cash back rewards.

Airline credit cards

Airline credit cards enable you to earn rewards within a specific frequent flyer program associated with an airline. By using these cards for everyday purchases, you accumulate points or miles towards your next flight. These cards also offer convenient benefits like priority boarding, airport lounge access, companion tickets, or free checked bags to reduce travel expenses and enhance your travel experience.

For example, if you’re loyal to Southwest Airlines, the Southwest Rapid Rewards® Priority Credit Card could be one of the best airline cards for you, offering an annual travel credit, upgraded boarding, and 25 percent back on inflight purchases.

Hotel credit cards

Hotel credit cards allow you to earn points within a hotel loyalty program and earn additional rewards by booking hotel stays with the card or through regular purchases. These cards often feature enticing welcome offers and perks like:

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

For instance, the Marriott Bonvoy Brilliant® American Express® Card offers Priority Pass lounge access, free night rewards, a Marriott Bonvoy property credit, and a monthly dining credit among its benefits.

Store credit cards

Store credit cards, also known as retail cards, are issued by retail stores to allow consumers to make purchases and pay them off over time. These cards are typically only usable at the specific store offering them, although some can be used within a group of stores.

Some store credit cards are co-branded and open-loop, meaning they can be used wherever the card processor (Visa, Mastercard, American Express, etc.) is accepted. Other retail cards are closed-loop, restricting usage to purchases with that specific store or brand.

Store-branded credit cards generally have higher interest rates than general-purpose cards and are more likely to charge deferred interest. However, if you can pay off your store credit card promptly, you may benefit from valuable perks and rewards programs.

0 percent APR/balance transfer cards

Zero percent introductory APR cards and balance transfer credit cards are valuable tools for paying down debt or making large purchases that can be paid off over time. These credit cards allow cardholders to carry a balance without accruing interest on purchases, balance transfers, or both for a designated period, typically between 12 and 21 months. Once the introductory 0 percent APR period ends, the card’s regular APR will apply.

While these cards may not offer robust rewards programs, their focus on interest-free periods can help you concentrate on reducing credit card debt.

What type of credit card should I choose?

To simplify your decision-making process, you can utilize Bankrate’s CardMatch tool to receive personalized matches based on your credit profile without undergoing a hard credit check. Ultimately, selecting the right credit card depends on several personal factors, including:

• Your current credit card portfolio
• Your preferred rewards type
• Your financial goals
• Your current credit card usage
• Your credit score status

By clarifying your needs and preferences, you can make an informed decision that aligns with your objectives and lifestyle. For example, if you find that you spend the most on groceries and dining out, opt for a credit card with high rewards in those categories. Additionally, consider how you want to be rewarded, whether through cash back, airline miles, or flexible points.

The bottom line

Various types of credit cards are available, and the best credit card for you will depend on your specific requirements, credit situation, and life stage. Furthermore, the timing of your credit card selection can influence the most suitable option for you. The ideal card will offer a combination of rewards, benefits, and features that enhance your financial well-being.

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

The Bank of America content in this post was last updated on 08.30.2024.