9 types of credit cards and how to choose one

Credit cards add flexibility to your everyday transactions, not to mention added perks. But with so many types of credit cards in the marketplace, you're probably wondering how to choose one.

Are you spending more on grocery and food delivery and less on gas? Maybe you're planning less travel and more staycations for the time being. Knowing the differences between the types of credit cards that are out there will help you make the best choice for what you need right now.

Here are nine common types of credit cards that each have their own advantages and drawbacks.

1. Cash back credit card

What it is

Some cash back cards offer a fixed percentage back on all purchases and don't have an annual fee. Other cash back cards may offer variable percentages back on everyday spending or for certain expense categories like restaurants, entertainment or online shopping. Different cards will outline their cash back criteria and indicate if there are redemption limits.

Benefits and features

Cash back rewards programs add a gamification element to spending that can be used strategically to save on future expenses. Often, your cash back balance can be deposited into your bank account or applied as a payment on your credit card statement. Some cards even allow you to buy partner gift cards with your cash back reward. The top advantages are that you can put this "free" money into a savings account, use it to pay extra on any debts or put it toward the cost of another purchase. One thing to watch for, though, is that you're not paying more in fees and interest charges on your purchases than you're earning in cash back rewards.

When to choose it

This might be the right type of credit card for you if you already make purchases that align with the reward categories. It's also a good fit if you typically pay off the balance every statement cycle so that you're reaping the cash back rewards without paying interest.

2. Travel rewards credit card

What it is

With a travel rewards credit card, you earn points on all your purchases that translate into credit you can use to pay for travel-related expenses like airline and train tickets, hotel stays and rideshares. These perks can add up, but unlike the freedom of use with cash back rewards, you may have to choose from a limited selection of vendors or dates to redeem your earnings.

Benefits and features

This type of credit card also offers a gamification aspect. Travel rewards card holders might pay for most or all their everyday purchases and bills with their credit card and end up accruing enough rewards for discounted or even free flights and hotel stays or other travel-related expenses and upgrades. Some travel rewards cards give you additional points for spending in certain categories related to travel or will waive foreign transaction fees when making international purchases.

When to choose it

If you're a frequent traveler for work or just because you enjoy it, this kind of rewards credit card might be ideal for you to gain significant savings. As with cash back credit cards, you'll want to ensure that annual fees and interest charges don't outweigh the financial advantages you accrue.

3. Credit card with an annual fee

What it is

Many basic credit cards are available without any fee for using them — other than interest charges and specific use fees, such as for late payments or cash advances. But some cards charge an annual fee in exchange for significant perks that make it worth the cost. You may get a lower interest rate, priority access to events, exclusive reward offers or discounts for certain purchases with affiliated partners.

Benefits and features

The main advantage of these cards is clear — for a comparatively small fee, you have the potential to gain much more in perks and savings than you're paying for the card. But before signing up for an annual fee credit card, it's a good idea to review exactly what it offers and then review your existing credit card statements and spending to evaluate whether the card's benefits naturally line up with what you use your card for. What you gain from using the card should be more than what you pay in annual fees.

When to choose it

A card with an annual fee can make sense when the benefits it offers are greater than the cost of the annual fee and when the perks and advantages are ones you actually use so that the cost of the card is worth it.

4. Store credit card

What it is

Retailers with a large base of customers sometimes offer their own store credit card that may or may not be affiliated with a major credit card issuer. Some cards can only be used with the particular retailer, but others may allow you to use them anywhere.

Benefits and features

In most cases, store credit cards will offer loyalty-based perks. You may get regular discounts, special limited-time deals, early access to sales or points you can apply toward future purchases at the store. They're designed to reward you for shopping with them, but while they may entice you to sign up with introductory 0% interest or a steep one-time discount, they often have high interest rates.

When to choose it

Similar to cash back and travel reward cards, store credit cards are a great tool for shoppers who are loyal to a particular store and benefit from the discounts and advantages they bring. But for the same reason, store credit card users should make the effort to be certain that what they're getting in loyalty rewards isn't negated by interest charges on carried-over balances.

5. Low-interest credit card

What it is

Many major credit card companies and banking institutions offer low-interest credit cards that are designed both to attract new customers and give people who may struggle with money management a way to establish better credit habits. These cards often offer a very low or even 0% annual interest rate for a limited time, typically six to 18 months.

Benefits and features

Low-interest credit cards are something everyone wants forever, which is exactly what makes them attractive for either starting with or switching to if you have high interest rates and high balances with other credit card companies. The introductory interest rate can give you a great opportunity to buy what you need and pay down the balance without the fear of looming interest. However, it's important to realize the rates will eventually go up to be competitive with other credit cards.

When to choose it

If you tend to carry balances forward every month, a low-interest credit card can be a smart way to start fresh or transfer your debt so you have a stretch of time to get yourself on track. These cards can also be good for someone just starting out with credit cards or wanting to try a new credit card company.

6. 0% credit card

What it is

A 0% credit card is typically a card that allows you to transfer the balance from another credit card and pay no interest on the transferred amount for an introductory period. Some 0% cards don't charge interest on new purchases made during a predetermined period.

Benefits and features

The big benefit of a 0% card is the eliminated or reduced annual percentage rate (APR). If you open a card with an introductory interest rate of zero and transfer a balance from a card with a much higher rate, you can save a considerable amount of money. The same is true if you open a 0% card that offers an introductory rate on new purchases, make a big-ticket purchase, then pay off the balance before the introductory period expires.

When to choose it

A 0% credit card can be the way to go if you carry a large balance on a card with a higher interest rate and are interested in reducing your debt more quickly. If the card offers 0% interest on new purchases, applying for one may make sense if you plan on buying a big-ticket item, such as a new furniture set or television, and want to pay in installments without accruing interest.

7. Balance transfer credit card

What it is

Balance transfer cards allow you to move the balances on your existing credit cards to a new account. These cards usually offer a lower or 0% introductory rate, enabling you to pay more on what you owe without the immediate burden of high interest.

Benefits and features

The main perk of balance transfer credit cards is that you're essentially moving or consolidating what you owe to a clean slate. Credit card company offers usually include no annual fee, low or no transfer fee and low or no interest on balance transfers for around 12 to 18 months, which can let you chip away at your debt without more interest piling up.

When to choose it

If you're motivated to gain control of your existing credit card debt, a balance transfer credit card could be your solution. It can give you a runway to decrease or even eliminate your principal balance. However, if you still have a balance on the card after the intro APR expires, these cards usually shift to much higher interest rates than other cards.

8. Secured credit card

What it is

Secured credit cards can help you build credit history. You put down a one-time, refundable deposit as collateral, and in exchange, the credit card company gives you a credit limit equal to or slightly more than the amount of your deposit.

Benefits and features

One of the main advantages of a secured credit card is that you don't need excellent credit to qualify. Since you put down a security deposit to open the card, it's less risky for the card company, so you can get the card even with a poor credit score. Your credit score can improve as long as you use your card responsibly, and you may be able to transition to a traditional unsecured credit card.

When to choose it

Secured credit cards can be helpful if you want to improve your credit score or can't get approved for a different card. But you'll want to be sure you understand the terms before you sign up. Some secured credit cards have annual fees or other charges that can chip away at your deposit and effectively decrease your credit limit.

9. Student credit card

What it is

Designed for those in college, student credit cards help you establish a credit history and build your credit score. They may be easier to qualify for than traditional cards. Often, student credit cards don't have the credit or income requirements that other types of cards do. Like other types of credit cards, student cards provide zero liability fraud protection and charge an interest rate on any balance you may carry.

Benefits and features

Features of student credit cards can vary, but many offer cash-back or other types of rewards. If you plan on studying abroad, choosing a card without foreign transaction fees can help you save money. Meanwhile, fraud protection ensures you're not responsible for any charges on the card if someone happens to swipe it or you misplace it after pulling an all-nighter (provided you report the fraud in a timely manner).

When to choose it

If you're currently in college and are ready to start to building your credit, a student card may be perfect for you. A credit card can help you develop responsible spending habits that stay with you throughout your adult life.

How to choose the best credit card

Whether it's your first or an additional card, think about your short and long-term financial goals before choosing a credit card. For instance, if your plan is to pay down your debt ASAP, a 0% card or balance transfer card may make the most sense. If you're planning the trip of a lifetime, a travel rewards card can help you cover some of the costs.

Your credit score also comes into play when selecting your next credit card. Certain cards, such as those with the lowest interest rates and some types of rewards cards, are only offered to people with credit scores in the good or excellent range. Meanwhile, if you're trying to build credit, a store credit card or student card may be the way to go.

Don't forget to look at the cost of the cards you're considering. While many credit cards don't charge an annual fee, some do. Weigh the cost of the card against any benefits you get from it. Also, look at how and when the card charges late fees or other penalties, so you're not caught off guard.

Ready to choose a new credit card?

Whether you're looking to build or rebuild your credit or want to maximize the rewards and benefits of your everyday spending you're likely find a credit card that meets your needs. Review the credit card options from Citizens to determine which card makes sense for your financial situation and goals.