Types of Cards

No Perks, Just Credit

If you simply want a credit card to make the occasional purchase—or don’t need lots of bells and whistles like rewards—a standard card is for you. Most credit unions, banks and other financial institutions offer this type of basic credit card. Often, these cards have different interest rates for purchases, cash advances and balance transfers (when you transfer charges on one credit card to another). Your past credit history, or how good you are at keeping on top of debt, plays a key role in determining how low or high the interest will be on your card.

Cash Back

This type of credit card rewards you—in cash—for charging purchases. For instance, some cards give you 1 percent of your total purchases. Some cards offer a higher cash back rate for shopping at certain merchants or making particular purchases. You should also check to see whether there is an annual fee for using the card. If cash back is important to you, look for a cash-back card with low or no annual fees. (Tip: Some financial institutions offer higher cash back percentages and no annual fees.)

Travel Rewards

Many airlines and national hotel chains have credit cards that allow you to earn points toward air miles or hotel stays. Some come with other perks, such as waiving the checked bag fee. You can earn bonus points by using the airline’s card to purchase airfare or the hotel chain’s card to book a hotel room. Once the points accumulate, you can redeem them for free hotel nights, airline tickets or upgrades. One thing to keep in mind: be sure to check to see whether there is an annual fee for using the card. If you don’t travel a lot, the fee may cancel out the rewards. (Tip: Some financial institutions also offer travel rewards cards, which may provide more flexibility by not tying you to one airline or hotel.)

Merchandise Rewards

With this type of credit card, you redeem purchase points for merchandise that the credit card issuer sells. Merchandise may include computer tablets, e-readers, cameras, jewelry and clothing. Some credit card issuers charge an annual fee for their rewards cards; others don’t.

Secured Cards

A secured credit card can be easier to get than a standard credit card when you’re still establishing a credit history or when you have bad credit. These cards function similar to debit cards in that you must deposit money into an account or put up collateral, such as a car, boat, jewelry or stocks. This security deposit serves as collateral for your purchases, and it may also determine your credit limit. For instance, if you put $500 into a deposit account, then you can make $500 in purchases with the card.

Read the terms and conditions carefully before signing up for a secured card. You may have to pay an annual fee, as well as a fee simply for applying. (Tip: Credit unions typically offer secured cards with low interest rates and low or no annual fees.) A secured credit card can help you build good credit, but you need to make sure the company you sign up with reports your payment history to the three credit bureaus. Not all of them do this. Having a card with a non-reporting company won’t help your credit score.

Premium Cards

Premium cards are for those with a high income and who maintain excellent credit. Cardholders may be able to enjoy many perks, such as priority airline boarding, access to airport lounges worldwide, hotel room upgrades and amenities, around-the-clock concierge services, and personal shoppers. A sizable salary may help you qualify for one of these cards, but you also have to pay. Annual fees for premium cards can range from $300 to $2,500.

Retail Credit Cards

These credit cards are co-branded with a major retailer, such as Disney or Amazon.com, and you can shop anywhere with them and earn points. You earn bonus points for shopping at the retail outlet that sponsors the card. Some retailers offer other perks, such as free shipping. The catch is that you can only redeem the reward with the card retailer. Retail credit cards typically don’t charge an annual fee; however, they may charge higher interest rates.

Store Cards

Many department stores and other retailers offer their own credit cards. Because they aren’t typically issued through a financial institution, it can be easier to qualify for this type of credit card. You may be encouraged by the salesperson at checkout to open a credit card and get an extra percentage off your purchase, but beware. Interest rates on these cards can be high, and if you don’t pay off your credit card bill each month, any discounts you received at checkout could be negated.

Incentives and Rewards

These days, many credit card companies offer some type of rewards program or incentives. These can include:

no balance transfer fees and super-low interest for a limited time

a low introductory rate on new purchases and balance transfers for a limited time

cash rewards: Cash back as a percentage of your purchase transactions

gas and grocery store rewards: Earn cash back or points for using a card at a particular retailer

travel rewards: Earn points toward airfare or hotel prices

sign-up bonuses: Earn money just for opening an account

Balance Transfers

A balance transfer can help you save money on high-interest debt by moving that debt to a card that charges a lower interest rate specifically for balance transfers. Some cards offer 0% interest for up to 18 months as long as you make the minimum monthly payments. However, many credit card issuers charge a balance transfer fee of between 3% to 5% of the transferred amount. (Tip: Navy Federal and some other financial institutions don’t charge a balance transfer fee.* Be sure to ask.) Transferring a $5,000 debt at a 5% fee would add another $250 to your pre-existing debt.

Paying off one credit card with another can be a financially smart move, especially if it means going from paying 20% interest on your charges to paying 0%. For instance, you would have to make 12 monthly payments of $463.17 to pay off a $5,000 debt at 20% interest. When you transfer that debt to a 0% interest card, your monthly payments drop to $416.67. When you subtract the 5% transfer fee, you still save $258.04 over a year’s time.

The key is to pay off the transferred balance in full before the promotional interest rate expires. If you don’t, the new card may charge an even higher interest rate on the remaining balance than the card you first transferred the debt from.

*Rates are variable and will vary with the market based on Prime Rate.

Cash Advances

You can use your credit card to do more than make purchases. You can also take out cash. You can withdraw funds at a credit union, bank or ATM with your credit card or use convenience checks supplied by the card company.

Borrowing against your credit card can be a quick way to make it through tight times, but be careful! The interest rate on cash advances is often significantly higher than on purchases. Plus, the interest charges start accumulating as soon as you take out the money. In addition, you may pay a transaction fee for the cash advance. This may be a flat rate, a percentage of the withdrawal or a combination of both. Some credit cards have a different credit limit on cash advances than on purchases. You may pay extra fees for going over your cash withdrawal limit.  

Travel Protection

Vacations are supposed to be relaxing, fun adventures, but sometimes things can go wrong. Some mishaps may be covered or reimbursed when you use your credit card to pay for certain travel expenses, like airfare and rental car reservations. You need to check with your credit card issuer to see what types of travel protection, if any, you are entitled to. Examples of travel protection include:


Travel cancellation insurance: If an emergency, illness or death in the family interferes with your travel plans, you can recoup the costs of non-refundable flights.

Travel delays: Some companies will reimburse you for meal and lodging expenses if your flight is delayed or canceled due to certain conditions, like weather issues. 

Travel accident insurance: If you’re injured or killed while traveling by plane, train, bus or boat while on vacation—and you paid for the ticket with your credit card—you or your survivors may receive a cash payout. Medical problems (such as heart attacks) aren’t covered, although some cards offer a separate travel insurance plan for a fee that covers certain medical expenses during travel.

Rental car collision insurance: A majority of credit cards will cover the cost of fixing damage to a rental car. You don’t need to pay extra for the rental car company’s insurance. 

Lost luggage insurance: Some credit card issuers will reimburse you for items if the airline loses your checked bag.

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