Types of credit cards explained
With so many types of credit cards out there, it can sometimes be hard to decide what's right for you. Some vary based on annual fees, while others offer rewards based on spending habits. To make the decision about what credit card works best for you, it can help to learn about different types of credit cards:
What are the different types of credit cards?
Credit cards usually fall into the following categories:
- Rewards cards
- Travel credit cards
- Cash back credit cards
- Starter credit cards
- Business credit cards
- Co-branded credit cards
Note that some cards can fall under multiple categories. For example, there are rewards credit cards that may also be co-branded, or travel credit cards specifically used for business. Below, you'll find a breakdown of each, and you'll see how some of these categories can blend together.
Rewards credit cards
Rewards credit cards earn points on a rewards system. They're set up so that with qualifying purchases, you're earning points you can eventually use to redeem specific rewards. Some rewards cards favor certain categories of spending, like dining out, while others reward everyday spending habits.
Travel credit cards
Travel credit cards are a type of rewards card geared specifically toward travel. Travel credit cards often come with an introductory offer, providing the cardmember with mileage or points. These rewards may take effect when the user hits a designated amount spent within a specific period. You can typically earn points on everyday spending. On top of intro offers and everyday spending, travel credit cards may include bonus points for booking hotels or other travel services. These points can later be redeemed for travel-related rewards.
Cash back credit cards
Cash back credit cards often have points that may be redeemed for cash back, gift cards or statement credits, among other potential options. Some cash back credit cards offer rewards based on general spending habits, while others might weigh specific categories like dining or travel, over others.
Starter credit cards
Starter credit cards are typically for those looking to build or improve their credit. Secured, unsecured and student credit cards are some common options within the starter card family.
- Secured cards are credit cards that typically require a security deposit which operates as the cardmember's spending limit. The deposit is normally returned when the cardmember closes the account, or if the lender transitions the account from secured to unsecured.
- Unsecured credit cards don't usually require a deposit as collateral.
- Student credit cards are meant for students with little to no credit, depending on the card. Some applications may require a security deposit or some form of credit history, while others may not. Some student cards come with student-friendly rewards as well.
Business credit cards
Business credit cards are specifically for business owners. Some business cards are meant for smaller operations while others are designed for larger or more corporate environments. To qualify for a business credit card, the applicant usually provides evidence of their business operations in the form of tax IDs, the business's legal structure, contact information, revenue and more.
Co-branded credit cards
These cards are co-branded by two parties. One party is typically a bank or financial institution, and the other party is a brand relevant to the card's purpose and perks — such as a retailer, gas station or online vendor. The cardmember of a co-branded card may gain access to exclusive rewards with the card's co-branded party. Card brands that partner with airlines or hotels can be examples of co-branded credit cards that are also travel card options.
What type of credit card should I get?
As you can see, there are many types of credit cards available, each designed to meet specific needs. Whether you're looking to upgrade with a new travel card or build a credit profile with a starter card, what you decide will likely be up to whatever best suits your personal interests and requirements.