Different Types of Credit Cards

Secured or unsecured. Cash back credit card rewards or airline mileage points. Good credit or credit building. It’s amazing how many types of credit cards there are available! What is the difference between all of them?

Secured vs. Unsecured Credit Cards

What do the terms “secured” and “unsecured” mean in terms of credit cards? Unsecured credit cards are typically what people think of when they hear “credit card.” You apply for a credit card, accept the credit card’s fees and interest rates, and are extended a credit limit for spending.

happy woman with credit card

 

On the other hand, a secured credit card is a credit card with a cash deposit. This deposit acts like insurance for the card issuer. The deposit is usually – but not always – equal to your credit limit. For example, if you deposit $500, then you can charge up to $500. On top of your deposit, a secured credit card may still have fees and interest rates.

 

So, why would you want a secured card? In some ways, it sounds a little bit like you’re paying someone to hold your money and charge you fees for using it! Well, secured credit cards are easier to get approved for since your deposit decreases the risk to the card issuer. If you don’t pay your bill, the credit card company can take money from your deposit.

 

Credit cards, whether secured or unsecured, can have a very important function in building credit. When you’re using your credit card, the credit card company reports your account activity to the three major credit bureaus (TransUnion, Equifax, and Experian). Secured cards are a good option for people with bad credit or very little credit, but there are also unsecured credit cards for people who are trying to build credit.

Rewards Credit Cards

Rewards credit cards come in both secured and unsecured form, though options for secured rewards cards are limited. Rewards credit cards can earn you points, cash back, or airline miles with each purchase you make. They are one of the easiest ways to have your money work for you. You’re buying gas, groceries and clothes anyway – even better if you earn something at the same time!

 

Rewards credit cards can give you excellent perks, but you should still be careful to not spend too much and end up carrying a balance on your credit card. It can be tempting to spend to receive the rewards, but you still get charged interest on your credit card debt.

0% or Low Interest Credit Cards

woman on phone with credit cardIf you’re looking to make a large purchase and don’t want to pay for it all up front, a card with a 0% introductory APR might be a good option. Similarly, consider a low interest or balance transfer if you carry a balance on a credit card with a high interest rate. A balance transfer card will let you transfer your existing balance to a new credit card with a low introductory interest rate. You’re often also charged a fee for transferring this balance.

 

These types of credit cards can also be a powerful tool to pay off credit card debt quickly. However, keep in mind that any 0% APR or low interest credit card will give you a time limit for how long that period lasts. When your time is up, interest drastically increases – so make sure you’ve paid off as much as possible before then!

Subprime, Prime, and Superprime Credit Cards

Subprime, prime, and superprime are how credit card companies classify how good or bad your credit score is, and there is no one-size-fits-all answer. Typically, subprime credit is below 669, prime is between 670-739, and superprime is 740 and above.

 

Keep in mind that it’s not the credit cards that are considered subprime, prime, and superprime, but instead peoples’ credit scores. When we categorize credit cards like this, it’s just about what level of risk the credit card company thinks the borrower presents – and because of that level of risk, what credit card benefits they offer to attract certain types of borrowers.

Student Cards
Student cards enable college students (who likely have limited income and no credit history) to establish credit history. These cards can be used like any other credit card. Typically, other perks like rewards are limited, but the main benefit is to help younger borrowers build credit so that when they graduate, they have more financial power.
Retail Credit Cards

Certain retail stores offer their own credit cards. Sometimes these can only be used with the retailer. In other cases, you can use them anywhere. Interest rates tend to be high, but they come with rewards, discounts, and promotions that are redeemable with the retailer. A popular example is the Nordstrom credit card, which gives cardholders rewards in the form of credit vouchers and early access to their annual sale.

happy man with credit card

 

There are lots of types of credit cards to choose from! When you’re deciding what’s important to you in a credit card, keep in mind what credit cards are available and how you spend – it can help you make a good strategy to get the most out of whatever credit card you apply for.

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The Total Visa Card is issued by The Bank of Missouri pursuant to a license from Visa U.S.A. Inc. Obtaining Your Card: The USA PATRIOT Act is a federal law that requires all financial institutions to obtain, verify and record information that identifies each person who opens a Card Account. What this means for you: When you open a Card Account, we will ask for your name, address, date of birth and other information that will allow us to reasonably identify you. We may also ask to see your driver’s license or other identifying documents at any time. *Card use subject to available credit; for security reasons, card may not be used at automated fuel pumps, for gambling transactions or at merchants outside the United States.

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