Different types of credit cards | 6 main classifications

All payment cards are usually divided into credit and debit. In fact, they are the two main types of cards that you use regardless of who issued the card and for what purpose.

A credit card is a type of payment card, which means that an amount is charged to your line of credit instead of the account’s cash deposits. It gives an opportunity to pay the bill later, so you can do it while paying off the debt instead the time of fact payment.

What types of credit card we know

It all depends on what you mean by credit card type. We will not analyze the cards of specific banks and financial organizations here. In this article, we will look at the main classifications of credit cards on various features.

The types of credit cards by issuers

A credit card can be issued by a bank or a retailer. The difference is easy to see. Bank credit cards, which also can be called general credit cards, are meant to be used anywhere. They can be used in any location that accepts credit cards including banks, stores, restaurants and other companies accepting non-cash payment for services. In other words, such cards are what we generally think of as traditional credit cards.

Retailer credit cards are considered to be highly specialized as they offered by a retailer for use with only that retailer. As a rule, it is a branded card of a clothing store, a gasoline company or any other retailer which means some incentive or reward for the card owner. It can be a personal discount, welcome bonus, cashback or something else. Of course, such benefits are attractive, but remember that you can use this credit card only with that retailer and some of its affiliates (within a chain of stores, gas stations, etc.).

Generating a lot of inquiries by applying for numerous retailer credit cards you may affect your credit report negatively. For this reason, such cards are suitable only for regular customers of specific companies. In most cases, a bank credit card is more appropriate option, although you lose out on the benefits offered by a retailer.

The types of credit cards by industries

The scope of the credit cards is almost unlimited. However, different types of credit cards may be issued for different purposes and businesses. Here are the most common cards among them:

  1. Travel credit cards.

There are different types of credit card connected with travelling. They include airline, hotel and flexible credit cards providing some rewards for the owners. It can be bonus points for those who select purchase of special categories or some free services (free checked bags, priority boarding, free hotel night certificate, etc.) in case of the branded cards that charge an annual fee.Travel credit card

Credit cards starting with 2 or 1 are often related to the industry or airline.

  1. Store credit cards.

Store credit cards mean almost the same. They also can provide some great perks and rewards programs, but this type of credit cards has a disadvantage. Store credit card is generally only used within the specific store that offers them or within a specific family of stores.Store credit card

Although a fuel card is similar to a credit card, it is not the type of credit card.

  1. Business credit cards.

The main purpose of a business credit card is to keep all personal and business expenses separate. In addition, such a card helps to earn rewards on all business spending. To become a cardholder it is necessary to have a business or income-producing activity. The exact list of benefits depends on the terms of a business card.Business credit card

The types of credit cards by security

A bank can offer you secured credit card or unsecured credit card. What’s difference? In the first case you have to provide a security deposit. It is necessary to set your credit limit and keep it if you don’t repay the balance on the card. To use an unsecured credit card such security deposit is not required.

Most credit cards are unsecured!

The types of credit cards by the system of rewards

Different types of credit cards may mean different rewards for the owner:

  1. Cashback credit cards give an opportunity to earn back a percentage of your spending. Depending on the procedure for generating cashback, they can be divided into several more subtypes of credit cards.
    • Flat-rate cards make it possible to earn a fixed rewards rate (usually 1%, 1.5% or 2%) regardless of what you’ve purchased with this credit card.
    • Tiered-rewards cards have the same benefits but only within particular spending categories. For instance, it can give you 2% cashback at grocery stores and 3% at gas stations. You need to find out all these details (rates and fees) before opening an account.
    • Rotating bonus cards mean that the reward might be changed monthly or quarterly. Owner of such card need to activate the new bonus categories on time to earn elevated rewards.
  2. Travel reward credit cards. We have already mentioned them before, but here we will look at them in more detail. This type of credit cards is appropriate for those who are looking for a card that rewards for travel-related spending. They can be general or co-branded.
    • General travel card helps to get cashback for travel related purchases you make. Earnings are calculated in a kind of currency called miles and are charged for every dollar spent in established categories.
    • Co-branded travel cards are the type of credit card which is valuable for a frequent customer of a particular airline or hotel. They may mean double miles or some else additional rewards, charged for purchases within an exact company. As a rule, they also charge an annual fee.

The types of credit-building credit cards

A separate category is represented by credit cards that are intended for consumers with poor credit scores or those who have never used credit cards before. Among the most common credit-building credit cards these ones:

  • Secured credit cards are the easiest way to build credit from scratch or improve poor credit score. In addition, this is the type of credit card which is approved almost for everyone.
  • Student credit cards are the type of credit cards which are issued for the college students. They may require proof of college enrollment to qualify but have no FICO credit history requirements. Each card means its own terms but it likely provides small credit limit because of no security deposit. Some students use such cards to have a good credit score after graduation. It is possible if you have a positive payment history during the study in college.

The types of credit cards by interest rate

There a lot of different types of credit card providing different interest rates, but here we will look only at the two, which are the most beneficial for a cardholder:

  • 0% interest credit cards offer 0% intro APR on purchases for some period of time.
  • Low-interest credit cards make almost the same, offering lower intro APR than standard.
  • Balance-transfer credit card is an offer which means the movement of high-interest debt onto a card with a lower interest rate. It might even let you secure an introductory 0 percent APR, but you should be ready to pay balance transfer fee (not always).

Here are the most common types of credit card, but you can add our list writing a comment below. Thank you!

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