There are literally hundreds of credit cards available to consumers and business people from different credit card brands, banks, and affiliate brands. With so many choices, it would seem like it wouldn’t make sense to keep introducing new types of credit cards, but they appear near daily with some other type of spin or offers.
Asking the question of why so many different kinds of credit cards can be answered in one sentence: the more types of credit cards, the more likely consumers and business-people will sign up for one. That’s because one of the options is bound to appeal to their interests, needs, or qualifications. Credit card companies also hope you will end up with more than one card as so many people often do. Additionally, data is being culled from credit card purchase histories to better understand purchase behavior.
Once upon a time, there were just very simple credit cards with one set of features as well as a standard usage fee rate and set of qualification criteria. However, with the ups and downs of the economic environment, credit card companies found that many no longer qualified for credit cards or they are not interested.
Then, the world shifted with more power in the hands of customers than companies who were now seeking products and services that aligned with their preferred lifestyle and financial situation.
When it became all about the customer, credit card companies caught on to the idea that they could introduce credit cards that offer multiple interest rate tiers, fees, and, most importantly, rewards programs that delivered the additional value and incentives that many needed to be convinced in order to have a credit card.
Now, millennials are changing how credit cards are used with a preference for digital wallets.
Types of Credit Cards
Here’s a brief rundown of the various types of credit cards as well as the criteria you can use to determine which kind might work for you:
- Standard credit cards are available from banks and financial institutions and are considered unsecured, so you don’t have to put down a security deposit in order to have one. You can opt for balance transfer credit cards to move other debt to these cards as a consolidation strategy. There are also low interest credit cards with a small introductory annual percentage rate that gets you to sign in but can change later on.
- Credit cards with reward programs come in nearly every variety under the sun, including cash back rewards with a percentage back based on your purchase amounts, points cards where you can accumulate points to get other merchandise, hotel or travel point credit cards that are co-branded with various travel brands, retail rewards points, and gas credit cards with options for points or rebates on gas purchases. Many companies have introduced these credit cards as a means of improving loyalty to their brand.
- Limited purpose cards can encompass gas credit cards as well as certain retail store brands.
- Airline mileage and frequent flier credit cards are very similar in terms of the rewards and co-branding strategy to win loyalty. Many of these include perks beyond free air travel, including upgrade to a higher travel class, priority boarding, and exclusion from many of the ancillary fees airlines now charge.
With so many people struggling with re-establishing their credit records after bad economic times, many credit card companies recognized a new opportunity for growth and a way to help these consumers.
There is now a new category for bad credit and credit repair credit cards that are also sometimes termed as “subprime” credit cards. Secured credit cards require some type of collateral and security deposit in order to be issued. These work well for people who have no or poor credit.
Additionally, there are now prepaid credit cards, which, in reality, aren’t even credit cards. However, they provide a way for consumers to avoid debt and retrain themselves on how to spend money wisely.
There are also credit cards just for business owners with some of the same features as consumer credit cards but with additional features like reports to delineate expenses, special business rewards, higher credit limits, and additional cards for employees.
Lastly, a new category of credit cards for college students has been developed to also help them establish a credit history and help them start to learn the responsibilities of handling credit. These tend to have much smaller credit limits and don’t tend to come with many rewards or features.
How to Select a Credit Card Type
While some of the credit cards in the list may be obvious to you whether they apply to you or fit your needs, others require more thought. These credit cards were essentially made for different types of users.
For example, there are certain consumers and business people who are considered non-revolvers. They pay their credit card balances in full each time they get a statement with a balance due.
Revolvers carry a balance and may just make the minimum payment or just above, which leads them to have to pay interest charges on the balance they carry over each month. There are some credit cards users that do both, choosing to pay off one balance while carrying a balance on another card.
When deciding to shop for a credit card, remember to look for certain things. First, determine the interest rate and whether it is fixed or variable. Also, find out if different interest rates are charged for cash advances, purchases, and balance transfers.
Second, see if there is annual fee and whether this can be waived. Third, assess the grace period time on payment, which typically can range from 20 to 30 days.
Lastly, think about why you are getting a credit card and determine how you can make them work for your benefit. If you are going to make many purchases with it and pay it off each month, you can cash in on a rewards credit card and make it worthwhile.
Try not to be too tempted by the low introductory rate credit cards because you may be end for quite a shock in about six months to a year. Most importantly, make sure you are in a position to be financially responsible with the credit so you don’t plunge yourself or business into debt.