Credit cards can be a divisive topic in the personal finance community. People either love them or hate them.

Some avoid them altogether, finding that cash in hand is the easiest way to stick to a budget. Others legitimately love nerding out and finding ways to maximize credit card rewards to travel the world for free.

You can probably guess that at Club Thrifty, we’re in the second camp. Credit cards are our buds. They’re convenient, they make tracking expenses a breeze, and they offer zero-liability protection on purchases. When used appropriately, rewards cards deliver a ton of value for the money.

Of course, rewards cards aren’t the only ones in the deck. There are a plethora of credit cards out there, and I bet at least one of them will work for you. Here is a rundown of some of the different types of credit cards that may fit your needs.

 

1. Traditional Credit Cards

Traditional credit cards are what come to mind when most people hear the term “credit card.” They are widely accepted in most parts of the world and operate on one of four major networks:

  • Visa
  • Mastercard
  • American Express
  • Discover

They’re used to conduct financial transactions during a statement cycle (approximately one month), with payment due within at least 21 days of the end of the cycle. That gap between the end of the statement cycle and the payment due date is called the grace period. Every statement includes the full statement balance, a minimum payment, and a due date.

The full statement balance is the sum of all transactions made during the statement cycle. If you pay that balance in full every month by the due date, you won’t pay any interest.

If you make at least your minimum payment, but less than the full balance, your account remains in good standing. But here’s the kicker: You will be charged interest on the unpaid portion of your balance. Annual interest rates (also called APR, for annual percentage rate) vary, but typically fall between 15% and 20%. If you don’t make your minimum payment by the due date, you’ll pay the interest plus a late fee…and your late payment will be reported to the credit bureau. In addition, it’s highly likely your interest rate will increase. Ouch.

Most credit cards work this way, but I’m using the term “traditional” to distinguish basic credit cards from rewards cards, low interest cards, and other types of specialty cards. More on those below.

 

2. Travel Rewards Credit Cards

The big kahuna of credit card rewards, travel cards earn cardmembers points that can be redeemed for airfare, hotels, and other travel expenses. Since we at Club Thrifty love travel, these are easily our favorite type of credit cards.

In addition to points and miles, travel rewards cards may include a suite of insurance perks for travelers and often come with attractive sign-up bonuses. Some even include airport lounge access! For people who use travel credit cards appropriately and strategically, the value of these benefits often far exceeds the annual fee. So, if travel is on your list of financial goals, a good travel credit card might be your new best friend.

Find the best travel rewards cards here.

 

3. Cash Back Credit Cards

If you’re looking for a simple, versatile rewards card, cash back credit cards are the way to go. One of the most popular types of credit cards, cash back cards earn a portion of every purchase back in cash, to be spent however you like.

Cash back rates typically average about 1% for free cards, but premium cards pay up to 6% cash back in select spending categories. On top of that, premium cards often include generous sign-up bonuses when you meet a minimum spend. Some even include insurance perks.

Check out the best cash back cards here.

 

4. 0% APR Credit Cards

Unlike rewards cards, which typically carry standard interest rates, 0% APR credit cards offer no interest charges on accounts in good standing for a set period of time. You typically won’t earn points or cash back, but you can carry a balance without racking up debilitating interest charges.

Because they offer a promotional period without interest, 0% APR cards are an extremely popular type of credit card to use when planning for a big project or home remodel. The can also be useful when you need to make a purchase and you don’t have the cash to pay up front, as long as you can commit to paying it back within the 0% APR time frame.

It’s important to read the fine print with 0% APR cards. That rate might only apply to purchases (not balance transfer or cash back), and there may be steep penalties for missing a payment. Lastly, if you are still carrying a balance when the promotional 0% APR period ends, you will be charged interest, and the rate might not be pretty.

Find our favorite 0% APR and balance transfer cards here.

 

5. Balance Transfer Credit Cards

Some cards offer low or even 0% APR on balance transfers, usually for a set period of time. This allows you to transfer balances from cards with higher APR, saving you a ton in interest charges. When used correctly, a balance transfer card can be a smart way to obliterate debt quickly. Just make sure to read the fine print.

 

6. Low-Interest Credit Cards

While 0% APR deals are usually for a set time frame, low-interest credit cards offer a regular low APR. If you carry a balance on one of these cards, you will pay interest charges, but it will cost you less than a card with a traditional APR. Low-interest credit cards tend to be light on other rewards, but they can be a good option for times when you can’t pay your balance in full.

 

7. Business Credit Cards

As the name implies, business credit cards are for business use, rather than personal use. Business owners may use them to charge and track business expenses, separate business and personal purchases, and increase spending power.

Because they target different users, business credit cards have different rewards structures and perks than personal cards. For example, it’s common to see a special rewards rate for business expenses. Fees differ, too, so examine your options and choose the one that best fits your needs.

Compare the best business credit cards here.

 

8. Student Credit Cards

Another popular type of credit card is a student credit card. Using a student card responsibly can be a great way for young people to start building a positive credit history. The best student credit cards have no annual fee and come with cash back rewards.

Unlike some premium rewards cards, students won’t need excellent credit to qualify, and lower limits are available. A lower credit limit is less risky for the issuer and for the credit card newbie.

Compare student credit cards here.

 

9. Store Credit Cards

Certain stores, such as Kohl’s and Macy’s, have their own credit or charge cards. These cards can only be used at the issuing retailer, and they usually include rewards that making shopping there more attractive.

If you do a lot of shopping at one retailer and the rewards are on point, a store credit card might make sense. Otherwise, the lack of flexibility can be inconvenient.

 

10. Co-Branded Credit Cards

Co-branded cards are different type of credit card than store cards. Although co-branded cards offer rewards specific to the partnering retailer, you can use them anywhere. In that way, they’re much more flexible. One example is the Costco Anywhere Visa by Citi. Costco is the partnering retailer, but you can use the card anywhere Visa is accepted.

Additionally, co-branded credit cards can often fall into other categories as well. For example, all of the co-branded Southwest Visa cards could also be considered travel rewards credit cards. Again, they earn Southwest Rapid Rewards points but can be used for purchases at any place that accepts Visa.

 

11. Subprime Credit Cards

Subprime credit cards target people with limited credit history or poor credit scores. They typically carry higher fees and APRs than traditional credit cards and do not offer rewards. For those reasons, they aren’t attractive to people outside the target audience.

If you have bad credit or you lack history, you can use a subprime card to build up your credit. To minimize costs, carefully consider the fee structure and never carry a balance.

 

12. Prepaid Credit Cards

A prepaid credit card is more like a debit card than a real credit card. At no point are you borrowing money — you’re just spending your own. If you prepay $500, then $500 is your “limit” (balance). As you spend that $500, your balance decreases the same way the balance in a bank account would, and you need to reload it to keep using it. 

Because prepaid cards don’t actually involve credit, there’s no interest. There are fees though, so make sure you know what you’re getting into. Monthly fees are common, and some cards include a reloading fee.

Unlike subprime or secured options, prepaid cards don’t report to the credit bureaus and therefore can’t be used to build a positive credit history. They can, however, teach someone the basics of credit card use and set up healthy spending habits.

Compare the best prepaid credit cards here.

 

13. Secured Credit Cards

Secured credit cards fall somewhere between traditional credit cards and prepaid cards. When you open a secured credit card, you pay a refundable deposit up front, which becomes your limit. From there, the card functions like a regular credit card. You’re able to charge purchases up to your limit, receive a monthly bill, and pay interest on unpaid balances.

Although you get access to revolving credit, there’s never any risk to the issuer. If you default on your bill, the issuer will pay the balance with your security deposit. That’s why people with bad or no credit can quality.

Types of Credit Cards Pin - picture of back of woman with arms raised overlooking ocean

Some secured credit cards carry fees, and most don’t offer rewards. Fee structures vary widely. Some are minimal, while others are outrageous. Realistically, the only good reason to get a secured credit card is to build positive credit history when you can’t get approved for anything else.

Compare the top secured credit cards here.