Credit Cards: Review, Types, and Features
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How Do Credit Cards Work?
To simply put it, credit cards allow you to borrow money from your bank with every purchase you make using them, and you return that borrowed money when you receive your bank's statement at the end of the month. So, for example, if you purchased a product from an electronics store using a credit card, your bank will pay the electronics store with the said amount, and you repay your bank when you receive your card's statement.
You must repay your bank on time, or else you will be charged with interest. Interest rates may differ according to the type of credit card you use and the bank that issues those cards.
Networks and Issuers
Before getting into which credit card type you should use, it is crucial to establish the difference between credit card networks and issuers. First, credit card issuers are the banks and credit unions that issue credit cards for clients and businesses. They minister to the cardholder's account by charging for purchases, accepting payments, dispersing rewards, and more.
On the other hand, credit card networks such as Visa, Mastercard, American Express, and Discover play a role in dictating where credit cards can be used to ease payment processing at the point of sale and regulate secondary credit card benefits.
However, the complicated part comes with two of the largest card networks, American Express and Discover, who also happen to be credit card issuers.
It is vital to know which credit card company issued your card and which network it is on. So you know to call your bank or issuer when you want to inquire about your account and your card's network when you want to know where you can use your card and what policies apply to you.
Credit Card Types In Terms of Benefits
There are several credit card types you should be familiar with before deciding which one suits you best. Each type has its own benefits, rewards, and interest rates. So, to ease your mind, we will summarize those credit card types so you can choose one to research more thoroughly at your leisure.
1. Rewards credit cards
The rewards credit cards are a great option for everyday expenses like groceries and basic purchases. They usually give you points or cash back, that can be redeemed in either statement credits, gift cards, or merchandise.
Our top recommendations for rewards credit cards are the Chase Freedom Unlimited and the American Express Blue Cash Preferred Card.
2. Cash back credit cards
Cash back credit cards rewards you with statement credits or, as its name suggests, cash back. Rewards, however, may differ on how they are allotted from card to card. For example, some cards offer a fixed rate of rewards while others offer bonuses in specific areas like traveling or dining.
Many cash back credit cards charge no annual fee, while others that offer more generous rewards charge annual fees up to $100. Depending on your spending amount in certain areas, you may want to choose a cash back card that offers extra benefits if your everyday spending varies.
Our top recommendation for cash back cards is the Blue Cash Preferred Card from American Express.
3. Travel credit cards
Travel credit cards provide you with rewards more aimed towards travel benefits. For example, such rewards could be travel credits you can use with any travel purchase or use to get discounts on hotels or airline flights.
If you are a frequent traveler, keep an eye out for premium cards that offer benefits like airport lounge access, annual travel credits, and credits for Global Entry or TSA PreCheck. These credit card points and perks can be earned by everyday purchases that are non-travel-related.
Our top recommendation for a travel credit card is the American Express Gold Card.
4. Balance transfer credit cards
Balance transfer credit cards are suited for consumers with high-interest credit card debt. Using this card will help them manage and pay down that debt because it usually provides an introductory 0% APR period for about 12 to 21 months.
Balance Transfer credit cards, however, usually charge a fee ranging between 3% to 5%. So we recommend you compare transfer fees between your potential new cards to find which ones suit you better.
Our top balance transfer credit cards recommendations are the Chase Slate Edge and the American Express Blue Cash Preferred Card.
5. Zero percent APR & low-interest credit cards
Some credit cards offer a zero percent APR for up to 21 months, while others offer low interest lower than the average rates and not just during an introductory period. Such credit cards are best for purchasing a product you want to pay back over time without high interest.
Our best option for a zero percent APR & low-interest credit card is the Blue Cash Everyday Card from American Express.
6. Business credit cards
Business owners can separate their personal and business expenses with business credit cards to earn rewards for their business spending. What is intriguing, though, is that business credit cards can also be cash back credit cards, travel credit cards, or secured credit cards. To qualify for a business credit card, you will need to have a business or an income-producing activity.
Looking for a business credit card that offers flexible benefits, a generous rewards program, and expense tracking abilities is beneficial. Usually, when you are redeeming your business credit card points, you can exchange them with either cash back or airline miles.
Our top pick for a business credit card is The Blue Business Plus Credit Card from American Express.
7. Student credit cards
As its name suggests, student credit cards are aimed at students as they count as 'starter credit cards.' Most student credit cards charge no annual fees and offer rewards for good grades and for each dollar they spend. Responsible usage can help students develop healthy financial habits by building their credit scores.
Student credit cards are easy to qualify for as they do not require a credit history and heavy requirements, so they are geared towards young people.
Our top choice for a student credit card is the Chase Freedom Student Credit Card.
Other Credit Card Types
1. Secured credit cards
Secured credit cards require you to put down collateral, usually a cash deposit. While it may not be the most convenient option, it's great for people who want to rebuild their credit after a financial difficulty or those who want to build their credit from scratch.
2. Store credit cards
Retail stores are the ones that usually provide store credit cards, and they allow their customers to charge their purchases and pay them over time. Some store credits have limited use to the store issued by, while some allow their store cards to be used within various other stores.
Store cards have higher interest rates than general-purpose cards, and they are more likely to charge deferred interest. That means you get a low or a zero percent APR for a period of time, but if you fail to pay back the full amount in time, you will be charged retroactive interest. So, if you can pay off your store credit card in time, you will find their rewards programs and benefits worthwhile.
3. Co-branded credit cards
Co-branded credit cards are similar to store or branded credit cards, but they are provided through traditional card issuers like American Express, Citi, or Chase. Examples of co-branded credit cards are airline and store credit cards, where their perks are worth more than cash back.
Our best choice for a co-branded credit card is the Hilton Honors American Express Surpass card.
Our Top Credit Cards Provider Recommendations
Now that we have laid out everything credit card-related let us present you with our top credit cards provider recommendations and their best credit cards, so you choose one to settle with.
1. American Express
American Express was established in 1850 and has grown to become the world's largest issuer of credit cards and actively operating in over 160 countries worldwide. American Express (Amex) offers a variety of personal and business cards, such as:
- Travel credit cards
- Cash back credit cards
- No annual fee credit cards
- Travel business credit cards
- No annual fee business credit cards
- Flexible payment business credit cards
American Express's best credit cards are the following:
- The Platinum Card® from American Express – cash back, rewards, and more.
- Blue Cash Preferred® Card from American Express – $250 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months.
- Delta SkyMiles® Gold American Express Card - $0 introductory annual fee for the first year, then $99.
Terms and conditions apply.
Chase is the second-largest general-purpose credit card issuer in the US. It offers rewards from companies like Disney and Southwest Airlines. Chase provides a wide range of personal, travel, business, and co-branded cards, each with a set of rates, fees, perks, and rewards programs.
Its most popular rewards card are:
- Chase Freedom Unlimited® Credit Card - 1.5% cash back on all other purchases with no annual fees.
As for travel cards, this is their best offer:
- Southwest Rapid Rewards® Plus Credit Card – Earn 40,000 bonus points after spending $1,000 on purchases in the first 3 months, plus 3,000-anniversary points each year, with a $69 annual fee.
Lastly, Chase's most popular business card:
- Chase Ink Business Unlimited® - $750 cash back after you spend $7,500 on purchases in the first 3 months, and earn unlimited 1.5% cash back rewards on every purchase with no annual fees.
Terms and conditions apply.
Citi offers a range of credit cards for people of all credit scores, and it can help you earn rewards, rebuild your credit and avoid interest with 0% intro APRs periods and more. Citi's cards are available on the Visa and Mastercard networks. Its best cards are the following:
- Citi® Double Cash Card – Earn 2% on every purchase. You get 0% APR for 18 months, and 13.99% - 23.99% APR after.
- Costco Anywhere Visa® Card– Earn 4% cash back on eligible gas for the first $7,000 per year, then 1% after. Plus, 3% cash back on restaurants and eligible travel purchases, 2% cash back on all other purchases from Costco and Costco.com, and 1% cash back on all other purchases.
- Citi® Diamond Preferred® Card – 0% intro APR, then 12.74% - 23.74% APR after with $0 annual fee.
Terms and conditions apply.
How Should You Choose Your Credit Card Type?
Now that you are familiar with the best credit cards, we recommend allowing us to guide you in choosing the credit card that suits you best in a few simple steps.
1. Check your credit score
First and foremost, you must check your credit score to know where you stand. Good and excellent credit will allow you to qualify for any credit card, including the top travel and rewards credits cards. However, if it is fair or poor, you will be limited with the options you can qualify for. Paying your bills on time and lowering your credit utilization may help you boost your credit score. You can perform a simple soft check online to know your credit score.
2. Know your goals
Before you sign up for a credit card, you should ponder what you hope to achieve with it. Ask yourself questions like do I want to rebuild my credit? Do I want rewards for my everyday purchases? Or do I want rare travel perks?
Knowing what you hope to gain will help you narrow down your best options, as there are no right or wrong choices, just what could benefit you more.
3. Look for fees and costs
Next, you should look out not only for your card's interest rates but also its annual fees, late fees, application fees, over-the-limit fees, balance transfer fees, foreign transaction fees, and other charges you may have to pay.
4. Evaluate your debt
Suppose you have a high-interest credit card debt. You should consider a balance transfer credit card that will allow you to quickly pay off your debts during a zero percent APR introductory period. Remember that balance transfers have to be made during a shorter period, usually in the first four months.
On the other hand, if you are debt-free and looking for perks and benefits, you can choose any other rewards card.
5. Compare rewards programs
It's beneficial to compare rewards programs if your aim is earning rewards. You should choose the credit card type that delivers the benefits you are looking for, and in the categories, you spend the most on, whether travel, supermarkets, or gas.
6. Compare minimum due payments
It is also good to know your card's minimum due payment amount, so you can expect how much to pay each billing cycle. The standard minimum payment for American Express and Chase is 1% of the balance or $25, whichever is more. For Citi cards, the minimum payment is either 1% of the balance plus any interest owed or 1.5% of the balance due.
Disclaimer: Several.com may receive a commission from card issuers.
This article includes the author's opinions, reviews, and analyses alone that have not been reviewed, endorsed, or approved by any of these entities. Please note that the information regarding each card's offer is believed to be accurate as of the date it was written and as card offers change regularly; reasonable efforts are made to maintain accurate information.