If you’re considering applying for a new credit card, you’ve likely noticed that you have a lot of options to consider. There’s a wide variety of credit card choices on the market. In fact, there are so many credit cards available that trying to understand the features, benefits, and differences between them all might feel overwhelming.

On a positive note, you don’t need to learn every detail about every credit card to figure out which offers may be a good fit for you. Yet it can be helpful to learn key details about some of the most popular types of credit cards and how they work. Below, myFICO presents a guide to help you get started.

For more credit education, visit myFICO’s blog at https://www.myfico.com/credit-education/blog

Unsecured Credit Cards

The most common type of credit card is the unsecured credit card. When you open this type of card, you don’t have to put down any collateral to back the account. Instead, the card issuer will approve you for a maximum amount of money you can borrow at once (aka the credit limit on the account).

When you manage your unsecured credit card account well, it has the potential to help you establish positive credit history over time. But if you pay your bill late or have a high credit utilization ratio, there’s also a risk the account could negatively impact your FICO® Score.

Secured Credit Cards

Secured credit cards are a type of credit card that you may want to consider if you have no prior credit history or a poor FICO Score. When you open this type of account, the card issuer may require you to make a security deposit that’s equal to the credit limit on your new account.

People often open secured credit cards to build credit. Yet keep in mind that it’s important to avoid late payments and maintain low credit utilization ratios on your accounts to accomplish that goal.

Rewards Credit Cards

Rewards credit cards are a popular option among credit cardholders. These types of accounts reward you when you use your credit card for eligible purchases.

The rewards you may earn using this type of credit card come in a variety of forms—including points, miles, or cash back earned as percentage of each eligible purchase you make. Once you earn enough rewards, you may be able to redeem them for statement credits, checks, flights, hotel stays, gift cards, and more depending on the credit card.

Before you apply for a rewards credit card, it’s important to understand that you may need a good or an exceptional FICO Score to qualify for this type of account.

Also, rewards credit cards (and, indeed, credit cards in general) are typically best for consumers who make a habit of paying off their full credit card balance every month. If you revolve an outstanding balance from one month to the next, high interest charges could quickly offset the value of any rewards you might earn on your account.

0% APR Credit Cards

Some credit cards may feature a 0% APR introductory period. When you open this type of credit card, you may be able to enjoy an interest-free period on either new purchases, balance transfers, or both (albeit for a limited amount of time).

If your goal is to pay down credit card debt, a card that offers 0% APR on balance transfers might help you accomplish this goal. A card that offers 0% APR on new purchases could also be useful if you’re looking for a short-term financing solution.

Keep in mind that you’ll typically need good or excellent credit to qualify for these types of credit cards. It’s also essential to pay on time when it comes to 0% APR credit cards. Not only could late payments negatively impact your FICO Score, but paying after the due date might also cause you to lose the promotional APR on your account early.

Small Business Credit Cards

A business credit card can help you separate personal and business expenses. Whether you own a brick-and-mortar establishment or freelance on the side of a 9-to-5 job, a business credit card could be a useful tool to help you.

You might also be able to earn rewards on business spending that you could redeem for extra cash back, travel, or other useful benefits depending on the credit card. And as an added benefit, some business credit cards might help you build business credit as well if the card issuer reports the account to any business credit reporting agencies.

Student Credit Cards

Student credit cards could be a good solution for college students who are trying to build credit history and establish a FICO Score for the first time. In general, it’s easier to qualify for these types of credit cards. But you should also expect lower credit limits and limited rewards with these accounts.

You might also face higher APRs with student credit cards. And some student credit cards may be secured credit cards that require a security deposit to open an account as well.

Bottom Line

There are many different credit cards available on the market. Finding the best option for you starts with narrowing down the types of credit cards you’re most likely to qualify for based on your current FICO Score and credit history. From there, you can make a list of factors that are most important to you including fees, APRs, rewards, and other features.

About myFICO

Get your FICO® Score from the people that make the FICO Scores, for free. Plus, free Equifax credit monitoring and a free Equifax credit report every month. No credit card required. For more information, visit https://www.myfico.com/products/fico-free-plan-a

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