As so many credit card types are promoted to customers these days, choosing the right card from a wide variety of options can be tricky. Making the right choice usually depends on things like credit score, how much you spend every month, and what you want to achieve like building a credit score, earning rewards, or fulfilling other financial needs.
Determining the right type of credit card is the first and foremost step of choosing a card based on your requirements and needs. Different types of credit cards are listed below in this article and how they can support your financial goals or spending.
5 Different Credit Card Types Everyone Should Know
1. Rewards Credit Cards
As the name shows, reward credit cards are those that allow consumers to earn free rewards upon making purchases and payments. The basic types of rewards are sign-up bonus, cashback, air mileages, and points.
Some consumers prefer cashback rewards while others like earning free points or rewards that are redeemable for a variety of products and services like grocery, free air tickets and hotel stays. Such cards are useful for people who spend thousands of dollars on bill payments or daily essentials.
2. Balance Transfer Credit Cards
A balance transfer credit card offers a lower interest rate or 0% introductory APR on balance transfers for a particular time period. If you carry a balance on your high-interest credit card and also want to save bucks on interest when paying off, getting a balance transfer credit card could be a great way to get out of debt.
Interest rates on balance transfers may vary. Some cards offer 0% while some may come with a lower interest rate. A card with a lower introductory APR (usually 0%) and a longer promotional period can help you save lots of bucks on interest and give you enough time to pay off your balance. A good credit score might be a requirement to qualify for such cards.
3. Student Credit Cards
Cards designed specifically for students by understanding that they have no or little credit history are named student credit cards. These cards are easy to qualify for than other types of cards as they require no credit history to qualify. Student cards are the best option for those who want to build good credit or repair their credit.
Some student cards also come with perks like the lower interest rates on balance transfers and special discounts on purchases. Students are required to be enrolled for a four-year course or program to be qualified for such credit cards.
4. Business Credit Cards
Business credit cards are particularly designed for brands and businesses and come with special perks and benefits. The best thing about business cards is that they help business owners keep personal and business transactions separate. Business cards also help you build a credit history for your business.
When it comes to applying for one, your personal credit score is also considered as the card provider needs an individual accountable for the balance. Before you get one for your business, you should check for rewards and perks that suit your business needs and daily spending. For instance, if you travel often for business purposes, you should choose a card that offers free travel reward points that can be redeemed for free flights and hotel stays.
5. Travel Credit Cards
Travel credit cards are the best option for travelers and businesses. These cards help earn rewards that are redeemable for travel-related things like air tickets, auto rentals, and hotel stays. Reward points can be earned by swiping cards for personal and business expenses. And then you can use available rewards on travel-related purchases or bookings.
Cardholders can also earn free points in a specific program, like a frequent flyer or loyalty program. Travel credit cards come with additional perks like access to the lounge, auto rental insurance, extended warranties, etc.
A credit card could be a useful financial tool when you use it strategically and pay off the balance in full every month. However, you should choose the right type of credit card as per your individual needs and requirements. Before you apply, check a credit card for perks offered, interest rate, other charges, annual fees, etc. This helps you make an informed decision. Use of credit card comparison services is also a good idea to choose the right type of card with the right benefits and rewards.