9 types of credit cards

If you’re considering a credit card, it’s helpful to understand what’s available and how different types of cards work. There are a lot of cards you might apply for. And they can serve different purposes.

This guide to credit card types can help you get started.

What you’ll learn:

• There are many types of credit cards, including cash back cards, travel cards, student cards, secured cards and cards designed for people building credit.

• Understanding the different types of credit cards can help you explore your options and decide which might be a good fit for you.

• Applying for a credit card can temporarily affect your credit scores. 

• Seeing whether you’re pre-approved lets you check for offers before you apply without harming your credit scores.

Credit cards fall into several categories, such as rewards credit cards, secured credit cards and low introductory rate credit cards. There are also charge cards, which are similar to typical credit cards but have to be paid in full each month. And there are also business credit cards. 

Credit cards can also be of multiple types. Take the Capital One Savor card, for example. It’s a rewards card that offers cash back with a low introductory rate and no annual fee. View important terms and disclosures. 

Here are 9 different credit card types that can suit a variety of needs:

Cash back credit cards often reward everyday spending on things like groceries, gas, dining, entertainment and other bonus categories. For every qualifying purchase, cardholders earn back a percentage of what they spend.

Some cards might offer a flat reward rate for all purchases. Others might offer higher rewards for categories like groceries or entertainment. Redemption options for cash back rewards might include statement credits, checks or gift cards.

Travel credit cards allow cardholders to earn rewards, like miles. You might come across two types of travel rewards credit cards:

• General travel rewards cards: These cards aren’t associated with any particular airline or hotel. This may give you more freedom to choose how to redeem your rewards. For example, instead of being limited to booking a flight with a single airline, you might have more options—or be able to redeem rewards for cash or gift cards.

• Co-branded travel rewards cards: These cards are branded jointly by the credit card issuer and the merchant—usually a specific airline or hotel. When it comes to purchases, these cards typically function like any other credit card. But rewards may be limited to the specific airline or hotel associated with the card.

Travel cards also may have other benefits to help travelers. For example, eligible Capital One travel rewards cards offer statement credits for TSA PreCheck® or Global Entry application fees, access to airport lounges and annual travel credits.

Points credit cards can work similarly to other rewards cards. But instead of cash back or miles, rewards are offered as points. Similar to other kinds of rewards cards, redemption options can vary depending on the issuer.

Store credit cards work a lot like other types of credit cards, though they’re affiliated with a specific store. And as the Consumer Financial Protection Bureau (CFPB) explains, “These cards typically provide additional discounts and frequent shopper rewards when used exclusively at their stores or with affiliate retailers.” 

Two types of store credit cards can be great financial tools when used responsibly:

• Private-label credit cards: These can usually be used only at the store and specified store affiliates. 

• Co-branded credit cards: Like traditional credit cards, these can typically be used anywhere—even outside the store and its affiliates.

Secured credit cards are different from traditional, unsecured credit cards because they require a security deposit to open an account. The deposit acts as collateral for your line of credit. And it’s usually refundable. Other than that, a secured card functions the same as an unsecured card.

When used responsibly, secured credit cards are a great tool to build credit. Some secured cards even offer rewards. And because they’re backed by collateral, secured cards are typically easier to get approved for than unsecured cards are. 

Student credit cards work similarly to other types of cards. But they’re tailored to college students without an established credit history. That’s why they might be easier to qualify for and offer more relevant perks and benefits.

To qualify for a student card, you have to be at least 18. And if you’re under 21, federal law requires a co-signer or proof that you’re able to make regular payments.

Some credit cards offer low or 0% introductory rates. These can be useful if you’re planning to make a big one-off purchase and then pay it back quickly.

By law, intro rates must last at least 6 months, but they can sometimes last longer. During that time, you can focus on paying down your account balance. That’s because you may not have to pay much—or any—interest, depending on the promotional period and rate.

When the introductory annual percentage rate (APR) expires, the standard APR kicks in. The standard APR will apply to both your current balance, if you carry one over, and future card balances. Depending on your card’s terms and conditions, it could kick in early if you are late with payments or exceed your credit limit.

When you transfer a credit card balance, you move an existing balance from one card to another—ideally at a lower interest rate. But you usually can’t transfer a balance to a card from the same credit card issuer. 

If you’re carrying a credit card balance, transferring it to a card with a lower rate could help you pay less interest—if you use the card responsibly and pay the balance during the promotional period. It could also help you consolidate debt or combine multiple balances into one, which could simplify payments.

But keep in mind that a balance transfer could come with fees. According to the CFPB, balance transfer fees are typically a fixed amount or a percentage of the amount you transferred—whichever is higher. And that fee could impact any potential savings.

No annual fee means you won’t be charged a fixed annual membership simply for having the card. But there may be other credit card fees or interest and finance charges, depending on how you use the card.

There are lots of credit cards offering rewards and perks that don’t charge an annual fee. If you’re interested in a card that has an annual fee, you might look at whether the perks and rewards outweigh the fee.

Now that you’re familiar with some of the most common types of credit cards, how do you choose the best credit card for your needs? Here are a few things to think about before submitting an application:

• Consider your credit scores: Your credit history plays a role in which cards you qualify for—and on what terms. Typically, applicants with higher credit scores qualify for better terms, such as higher spending limits, lower introductory rates and elevated rewards. But if you’re working to improve your scores, you may want to focus your search on a credit-building card.
  
  You can monitor your credit score and access your TransUnion® credit report for free with CreditWise from Capital One. It’s free for everyone, and using CreditWise won’t affect your credit scores. You can also get free copies of your credit reports from AnnualCreditReport.com.

• Determine your financial goals: If you want to consolidate credit card debt, you could consider a balance transfer card with a low or 0% introductory APR. If you’re interested in earning travel rewards, then a miles card might be appealing. Generally, any credit card can be used to build credit. But that’s only if you use your card responsibly by doing things like paying statements on time every month. 

• Understand card costs: Some cards come with annual fees. And things like missed payments could result in fees or other penalties, but those are avoidable with responsible use. Before you apply, be sure you understand how credit cards work and any potential costs.

Finding the right credit card can take patience and research. Getting familiar with the different types of cards and how they work can help you make your decision.

When you’re ready, you can compare cards from Capital One and see whether you’re pre-approved—with no harm to your credit scores. 

• Explore travel and miles rewards credit cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase every day with a cash rewards credit card.

• Earn unlimited cash back, whether you’re going out or staying in, with a dining and entertainment credit card.