What are the different types of credit cards?

Summary

• Different types of credit cards are designed for different situations, such as earning rewards, managing debt, building credit, or supporting a business.
• The four main categories of credit cards are reward cards, low interest cards, secured cards, and business credit cards.
• Choosing the right card starts with knowing your goals, spending habits, and credit score.

There are many different types of credit cards, each with a variety of features and benefits. Some cards are designed for building credit or managing debt, while others are better for earning rewards.

With so many choices, picking the right credit card may seem complicated. Organizing credit card options into four broad categories can make it easier to find one to support your financial goals.¹

 

Rewards credit cards

Reward cards offer incentives like points or cash back for purchases. As you use the card, you earn rewards that you can redeem for travel, gift cards, statement credits, and other items. How you earn rewards and how they are redeemed varies by card.

Cash back credit cards

A cash back credit card pays you a percentage of your spending as a cash reward. The reward often comes as a statement credit, gift card, check, or deposit into your bank account.

Cash back cards are typically structured in one of three ways:

• Flat-rate rewards: With flat-rate rewards, all purchases earn the same cash back percentage, regardless of category or merchant.
• Tiered rewards: The reward amount varies by spending category in a tiered rewards structure. A card might give you 4% cash back on travel, 3% on dining, and 1% on everything else.
• Rotating categories: This reward structure is like tiered rewards, except the highest cash back percentage periodically changes. For example, you may earn 5% back on groceries for one quarter and 5% on gas the next.

Some cash back credit cards, like the U.S. Bank Cash+® Visa Signature® Card, let you decide which category earns the highest percentage back every quarter. This structure gives you some control over how you earn rewards.

Points credit cards

Point-based credit cards offer a set number of points for every dollar spent. You can usually redeem these points for discounted or free purchases, including:

• Travel expenses.
• Gift cards.
• Merchandise.
• Statement credits.
• Charitable donations.

Many cards offer extra points in popular spending categories, like restaurants or subscription services, including the U.S. Bank Altitude® Go Visa Signature® Card. The extra points can help you earn rewards faster on purchases you make most often.

Travel credit cards

Travel credit cards reward you with free or discounted travel, and they often come with additional benefits that enhance your travel experience, such as airport lounge access. Travel rewards usually appear as points you redeem through the provider’s travel portal, but they can also be statement credits that offset your travel purchases.

Many travel cards reward everyday purchases, but may offer additional rewards when booking hotels, buying plane tickets, or making other travel purchases. For example, the U.S. Bank Altitude® Connect Visa Signature® Card offers extra points in travel categories.

Co-branded credit cards

A co-branded card connects a credit card provider with a well-known brand like an airline, hotel chain, or retailer. While you may earn rewards wherever you shop, spending with the partnered brand usually brings bonus rewards.

Co-branded credit cards often have exclusive, company-specific benefits, like cash back groceries or points for booking flights.  However, redemption options are typically limited to products or services the partnered brand offers.

 

Low interest credit cards

Low interest credit cards offer a lower annual percentage rate (APR) than typical cards. The APR is the yearly cost of borrowing money with your credit card, and it gets charged whenever you carry a balance into the next billing cycle. By minimizing the impact of credit card interest, low interest cards make it easier to buy big-ticket items and manage short-term debt.

0 % intro APR  credit cards

The typical 0% intro APR  credit card has an introductory interest-free period on certain transactions, such as purchases and balance transfers. When the interest-free period ends, the APR returns to the normal rate.

This type of credit card is a good option when you have a major purchase on the horizon, like new furniture. The same may be true if you periodically carry a balance from one billing cycle to the next. If you pay off the debt before the interest-free period ends, you may avoid expensive interest charges.

Balance transfer credit cards

A balance transfer card   lets you move existing debt from one or more credit cards to a new card with little or no interest for a set time. During this window, more of your payments go to your balance, so you can pay down your debt faster.

Keep in mind that paying no interest doesn’t mean paying no fees. Many cards charge a balance transfer fee between 1% and 3%, plus missing a payment may trigger late fees. Staying on top of your due date ensures you make the most of the interest-free period.

 

Secured credit cards

A secured credit card is a card designed to help you improve your credit score. You pay a refundable cash deposit that sets your credit limit – a $1,000 deposit typically makes your limit $1,000 – and ensures your balance is paid off if you default on your payments.

You can use a secured card to enjoy a night out or pay your bills – similar to how you might use a traditional card. As you use the card responsibly and pay your monthly bills, you can build or rebuild your credit, and possibly even graduate to a traditional card. Secured cards may even offer rewards, like the U.S. Bank Cash+® Secured Visa® Card.

 

Business credit cards

While business credit cards are similar to personal cards, they often have different features designed for small business owners, like higher credit limits, expense tracking, and business-focused rewards programs. These features help keep a business running smoothly.

Business credit cards also contribute to building your business' credit profile while establishing a relationship with a financial institution that may be beneficial if you ever need a loan or line of credit.¹

 

How to choose the right card for you

The right credit card – or even the right number of credit cards – depends on your goals. Whether you want to pay down debt, maximize rewards, or improve your credit, there’s a credit card that can help.

Consider your spending habits

Credit cards typically reward you more generously in popular categories, like travel, groceries, gas, dining, or entertainment. Determining where you’re most likely to spend can help you choose a credit card.

Here are a few more questions to get you thinking about your spending habits:

• Do I travel frequently enough to benefit from travel perks like lounge access or TSA PreCheck ®?
• Will I use a card mostly for everyday purchases, occasional expenses, or a mix?
• Can I regularly pay my balance in full each billing cycle?

Rewards aren’t the only issue to factor into your decision. Consider what purchases you might face soon. The possibility of a big move or a major repair may change which card makes the most sense based on interest rates or credit limits offered.

Think about your credit score

Knowing your credit score can help you identify the best credit card options for your situation. Applying for credit cards with the best approval odds avoids unnecessary credit inquiries that could temporarily hurt your score.

If your score needs a little work, consider cards designed for building credit or paying down debt and make sure you can responsibly pay your minimum every month.

Watch out for fees and interest rates

Fun rewards and interest-free periods can be attractive, but you want to think about the true cost of a credit card before you apply – and that typically shows up in the fees and interest rates. Weighing the value of a card against the cost of owning it may help you decide if it’s the right one for you.

 

Align credit card options with your financial goals

Choosing the right credit card comes down to matching the options to your goals. But it doesn’t stop there. As your spending habits and financial priorities evolve, you want to regularly review how you use your card. A quick check-in can help ensure your credit cards still support your financial aims.

Table of Contents