9 Min Read | Updated: August 15, 2023

Originally Published: December 20, 2019

Types of Credit Cards: Understanding the Differences

Understand how different types of credit cards cater to specific needs, such as travel or cashback rewards.

This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.


There are a number of different types of credit cards available, which means you have plenty of options.

While credit cards function in a similar way, they offer different features, benefits, and rewards.

When choosing a credit card, it’s easy to feel daunted by the vast array of cards on the market. To help you choose, we’ll describe different types of credit cards, how they work, and their benefits. Within each type, there is a wide variety of options—but you’ll be able to make an informed choice with greater confidence that the card’s basic features will work for you.

Different Types of Credit Cards

Here are some of the main types of credit cards:


  • Standard credit cards are the most traditional type of credit card; they allow you to spend up to a pre-set credit limit.

  • Rewards credit cards operate similarly, but offer rewards such as travel points or cash back (usually in the form of a statement credit).

  • Balance transfer credit cards usually have low introductory interest rates to make it more attractive to transfer balances from other credit cards.

  • Charge cards have no present spending limit, but the balance on the card will need to be paid in full each month.

  • Student credit cards are for college students seeking their first card.

  • Business credit cards can be used by business owners and employees, and may offer business-focused rewards.

  • Secured credit cards require a cash security deposit that reduces risk for the credit card company.

  • Store credit cards can only be used with specific retailers.

  • Prepaid cards are not true credit cards; you have to load them with cash before you can use them for purchases.

Standard Credit Cards

Standard credit cards are the most traditional type of credit card. Understanding how they work will give you a good foundation for understanding the other different types of credit cards, such as rewards and balance transfer credit cards, which essentially operate the same way but offer additional features.


Standard credit cards allow you to spend within a pre-defined credit limit. Your credit purchases are pooled together onto a credit card statement covering a specific period, typically a month. If you pay the statement purchase balance each month on or before the due date, then for most charges, you will not be charged interest on that revolving balance. The exception to this is certain transactions such as balance transfer or cash advances where interest will still apply. The balance that you carry over every month—on which you will pay interest—is known as “revolving credit.”  You must make the minimum payment each month to keep current and avoid late fees. Card issuers will often charge an annual fee as well for certain credit cards, though “no annual fee credit cards” also are available.


The interest rate on a standard credit card is called an annual percentage rate (APR). Most credit cards charge a variable APR, although some cards offer introductory 0% APR for a certain period of time, generally between 12 to 21 months.1 Some types of credit cards, known as subprime cards, may have even higher APRs as well as additional charges, and are typically designed for people who lack good credit.

Standard Credit Cards

 Benefits of Standard Credit Cards:

  • They can be a straightforward way to gain access to financing.
  • They can be cost-effective, especially if you pay off the balance every month.

Rewards Credit Cards

With rewards credit cards, you earn financial rewards as you spend. These vary considerably, but at a high level, there are three main types of rewards cards:

  • General rewards points. You earn points based on eligible purchases that you make. You can typically redeem these points in a variety of ways. Depending on the card provider, your points may go further if you use them to make purchases with the card issuer’s partner companies.
  • Travel rewards credit cards. You can usually earn points or miles with travel rewards cards. These cards typically allow you to earn points when you make select travel purchases, or in some cases, when you make other purchases as well. These points or miles can add up quickly if the card offers generous rewards for certain category purchases. You can redeem points and miles in a variety of ways and may be able to use them towards flight purchases, hotel stays, and more.
  • Cash back credit cards. Cash back is another type of reward. With a cash back card, you will typically receive a percentage of your spending back, often in the form of statement credit.

There are more options for rewards credit cards than any other type of credit card. For example, travel credit cards can break down further into airline miles and hotel credit cards, any of which may also be a “no-foreign-exchange-fee” credit card. Conversely, some rewards credit cards offer multiple types of reward. However, apart from the fact that they offer rewards, these cards mostly operate in the same way as standard credit cards.

Rewards Credit Cards

 Benefits of Rewards Credit Cards:

  • Depending on the card and how it’s used, rewards may significantly reduce the effective cost of credit.
  • If you travel a lot, perks like free or discounted flights and hotel stays can outweigh the annual fees.

Balance Transfer Credit Cards

Some credit cards let you transfer balances from other cards. However, balance transfer cards usually offer a low introductory interest rate specifically for that purpose. The interest rate can be as low as zero, but it typically only operates for a short period of time (as little as six months), after which it reverts to a higher standard interest rate. You may, however, lose the introductory rate if you miss a minimum payment or pay late. You typically need a good credit score to qualify for a balance transfer card—and even better credit scores to get a 0% introductory APR balance transfer card.

Balance Transfer Credit Cards

 Benefits of Balance Transfer Credit Cards:

  • If used wisely, can help you pay off your credit card balance faster by reducing the portion of your payment spent on interest charges as long as you pay it off before your introductory rate expires.

Charge Cards

Charge cards work differently from standard credit cards. There’s often no pre-set spending limit, but in general you must pay off the balance in full every month. There’s no interest charge if you pay on time, but late payments may incur fees. However, some charge cards allow you to pay off part of the balance, with interest, over a longer period. Charge card providers usually charge an annual fee. Typically, you need a good to excellent credit score to qualify for a charge card.

Charge Cards

 Benefits of Charge Cards:

  • They typically have no preset spending limit, unlike most standard credit cards, so they may be a better option for financing large purchases.
  • They typically have generous rewards programs.

Student Credit Cards

If you’re a young person looking for your first card, you may find it hard to qualify for most types of credit card because you haven’t accumulated much credit history. However, if you’re a student, you may qualify for a student credit card.  Several types of student credit cards are available, including rewards cards, cash back cards, and cards with low-interest introductory periods.


APRs on student cards are similar to those on standard credit cards. It’s worth looking for cards with low APRs and zero fees.

Student Credit Cards

 Benefits of Student Credit Cards:

  • You can usually get a student credit card even if you have limited credit history.
  • This type of card can be a good way to establish credit history.

Business Credit Cards

If you are running a small business, you might consider paying for business expenses with a business card. Like personal cards, business cards can be a straightforward way to gain access to financing, but the balance will typically need be paid in full every month otherwise interest will start accruing. Some business credit and charge cards may have extensive rewards programs geared towards the needs of businesses and their owners.

Business Credit Cards

 Benefits of Business Credit Cards:

  • They can help your cash flow.
  • Rewards programs can help reduce business costs.
  • You can provide employees with credit cards that help you keep tabs on expenses.
  • They can help you keep business-related expenses separate from personal expenses.

Secured Credit Cards

If you don’t have a credit history or if you have a low credit score, you may not qualify for a standard credit card or a rewards card. As an alternative, you could consider a secured credit card.


To obtain a secured credit card, you need to make a substantial security deposit, typically equivalent to the credit limit on the card. You can then use the card like any standard credit card. These cards don’t usually offer rewards, though some offer cash back on certain types of purchases such as groceries and gas. Some cards can be upgraded to a standard card after a period of time, provided that you haven’t missed payments or paid late.

Secured Credit Cards

 Benefits of Secured Credit Cards:

  • They are typically designed for people with no or poor credit.
  • With responsible use, and over time, they may be able to help you establish credit history.

Store Credit Cards

If you often shop in a particular store or retail chain, you may find that a credit card issued by the store works for you. Some major retailers issue this type of card, which can typically only be used to make purchases at a specific store. Some store cards may provide discounts or other rewards.

Store Credit Cards

 Benefits of Store Credit Cards:

  • These cards may be easier to qualify for.
  • These cards may be useful if you are brand loyal and regularly shop at the same store.

Prepaid Cards

Prepaid cards are not a true type of credit card, since they must be loaded with cash before they can be used. Once you have loaded your card with cash, you can use it for purchases until the balance is zero, at which point you’ll need to put more cash on the card before you can use it again. There may be a charge for reloading the card. Some prepaid cards, such as gift cards, can’t be reloaded—you have to buy a new card. Since prepaid cards are not a type of credit card, they can’t help build your credit score.

Prepaid Cards

 Benefits of Prepaid Cards:

  • These cards may contain security features can make them safer than carrying cash.
  • These cards make great gifts.

How to Choose the Best Credit Card for You

With so many credit card options available, how do you know which credit card is best for you? You’ll want to keep a few factors in mind to help guide your search when choosing a credit card:


  1. Consider Your Financing Needs
    First up, consider your financing needs. Look for a credit card that will offer you the financing you’re looking for, on terms that you’re comfortable with.

  2. Check Your Credit Score
    Your credit score could impact which cards you are eligible for. In most cases, having a higher credit score could help you qualify for credit cards that offer better rewards and higher spending limits.

  3. Keep Your Preferences In Mind
    What type of credit card will benefit you the most? Do you prefer a cash back card or one that will offer 0% introductory APR? Would you like to earn rewards on specific purchases, or prefer a card that offers rewards on a wider range of purchases? Keep your preferences in mind when making your selection.

  4. Consider the Card’s Features and Fees
    Finally, consider the card’s features and fees when assessing your available options. What type of fees does the card include? Are you happy to pay an annual fee in exchange for the rewards and benefits that the card offers? What type of interest will apply if you carry a balance from month to month?

The Takeaway

With so many different credit cards available today, you have plenty to choose from, allowing you to find a card that best aligns with your needs. Shopping around, and paying attention to the card’s features and benefits, along with the terms and conditions can help to guide your decision.

Frances Coppola

Frances Coppola spent 17 years in the financial services industry before becoming a noted writer and speaker on banking, finance and economics. Her work appears regularly in the Financial Times, Forbes and a range of financial industry publications.


All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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