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Types of Credit Cards: Which Credit Card Should You Use?

There’s a great number of different types of credit cards and each one is designed with different financial goals in mind. But, they all fall into certain categories based on their perks and it’s important to understand the types of credit cards to help you select the best one for you.

Low interest credit cards

Low interest credit cards have lower APRs than the current industry average (16,13%). It’s an interesting option for people who are prone to carrying a balance from time to time. Besides standard low interest credit cards, some cards have APR offers that let you pay low or, even, zero percent interest for a period of time on purchases or balance transfers.

  • Balance transfer credit cards: it offers a lower intro APR on balance transfers. If you want to refinance credit card debt and save money on interest, a balance transfer card is ideal;
  • Zero interest credit cards: it offers 0% intro APR on purchases. If you’re looking for some short-term liquidity, a zero interest credit card is ideal. Zero percent intro APR cards typically offer that rate for 6 months to 18 months before the regular variable APR applies

Rewards credit cards

The rewards credit cards are every card that earn purchase rewards. They net you return, usually in the form of points, miles or cash back, on your spending. Most of the rewards credit cards have a sign-up bonus, which allow you to earn extra rewards for spending a certain amount in a set time period, usually the first three months. There are two different types of rewards credit cards:

  • Cash back credit cards: you earn rewards that can be redeemed as cash into your bank account, checks, gift cards or a statement credit. They can be flat-rate cash back cards, tiered bonus category cash back cards or rotating bonus category cash back cards.
  • Travel credit cards: you can redeem your points or miles for free or discounted travel. Plus, they often tout additional travel benefits, such as no foreign transaction fees, hotel or airline upgrades, free access to airport lounges, travel insurance and travel-centric statement credits. They can be general purpose travel credit cards, airline travel credit cards or hotel travel credit cards.

The rewards credit cards are perfect for:

  • Transactors: people who pay their balance in full each month;
  • Frequent travelers: they can help you rack up points or miles, earn elite status and save money on common travel expenses;
  • Savvy shoppers: they can net you a return;
  • Top credit scorers: they require good-to-excellent credit.

Credit-building credit card

A credit card is one of the best ways to start building or rebuilding your credit, because they are designed specifically to help people with no, fair or, even, bad credit do just that. There are three types of credit-building credit card:

  • Secured credit cards: you need to pay a security deposit to open a secured credit card. The security deposit is often (but not always) equal to your starting credit limit. High-quality secured credit cards can usually graduate to unsecured cards, meaning you get your deposit back if you make enough on-time payments. They’re reserved for people with bad credit or no credit who can’t qualify for a traditional, unsecured credit card.
  • Student credit cards: they were made for students and recent graduates start building credit. Even so, they have excellent perks, including free credit score tracking and money back for good grades. Plus, they feature a low barrier to entry, meaning their credit requirements are less stringent than a starter credit card, and they come with low credit limits.
  • Starter credit cards: they are all products that are beginner-friendly and they will vary depending on your personal profile and credit history. So, they can be no credit (it’s good for people who have no credit history), bad credit (they accept bad credit) or fair credit (it’s for people who are trying to improve their credit into good or excellent).

Store credit cards

Many chain stores (Macy’s, Target or Lowe’s) offer their own credit cards. Even though they are accepted everywhere, store credit cards are often only for use in-store, because they usually come with exclusive discounts and rewards that can only be used at that store.

Pay attention in the fine print on any 0% intro APR offers from store credit cards. They can involve deferred interest, which is tricky and can lead to hefty surprise interest charges.

High limit credit card

The high limit credit card is a card made for the high income public. These are luxury cards, which guarantee different perks to their users, such as access to exclusive airport lounges, higher credit limits and special benefits programs. They let you spend more and they can help you protect your credit by making it easier to keep your credit utilization ratio low. But you need excellent credit to qualify.

Business credit cards

These types of credit cards are made for entrepreneurs, business owners, gig workers and freelancers. They offer rewards for common business needs, like office supplies or internet services, higher credit limits and flexible financing offers.

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