Different Types of Credit Cards
Whether you already own a credit card or are thinking of applying for one, you should know how to use it responsibly. Credit cards can make financial planning easier, but they need to be used the right way!
All types of credit cards can be broadly categorized as:
A secured credit card requires you to pay the lender some deposit money upfront or pledge an asset as collateral. A credit limit is then set on your card according to the collateral value. Card providers can seize this collateral if you default on payments. Because of the low risk to lenders, secured credit cards are relatively easy to get.
An unsecured credit card is not backed by any money or assets that you pledge as collateral. This is the most common type of credit card, but not always easy to get. Since the card issuer entails some risk in providing you with a card, they will conduct a thorough check of your credit history, financial strength and earning potential first.
Credit card types may also be based on earning and spending patterns:
Silver Credit Card
This card is designed for individuals who don’t earn a high salary but have been employed for at least 4-5 years. To make this card type more affordable, membership fee is usually quite low and balance transfers may be interest-free for 6-9
Gold Credit Card
This card is provided to individuals with a high credit score who earn a good salary or income. It typically offers higher credit and cash withdrawal limits, supplementary cards for family members, travel insurance coverage and cashback/rewards.
Platinum Credit Card
This card type offers more privileges and benefits than silver or gold cards, including add-on cards, fuel surcharge waivers, exclusive rewards or deals on shopping, dining, lifestyle and entertainment. Membership and annual fees are higher as well.
Titanium Credit Card
This is a premium card for people who earn and spend a lot. Benefits include fuel surcharge waivers, annual fee reversals, insurance, welcome gifts, add-on cards for family members, offers on dining, lifestyle, travel, beauty and wellness, etc.
Premium/Signature Credit Card
This card is typically provided by financial institutions to customers spending a very high amount annually. Along with regular benefits, cardholders may get exclusive privileges, deals and rewards, such as shopping or lifestyle vouchers.
You can compare credit cards according to features and usage:
Classic Credit Card
This card offers basic features such as revolving credit, interest-free repayment period, cash withdrawals against credit limit, rewards/cashback, international acceptance and insurance, often at low interest rates with zero joining/annual fees.
Balance Transfer Credit Card
This type of card allows you to transfer the balance from other credit instruments at very low rates for a specific period. You can save money by moving outstanding amounts from high-interest cards to one with a lower interest rate.
Corporate Credit Card
This card is usually provided to employees by a business or corporate establishment. It can be used for work-related expenses such as travel, bill payments, fuel, etc., and is only valid while the cardholder is employed by the company.
Contactless Credit Card
Unlike other credit and debit cards, this card type features a unique payment system that does not require a PIN or OTP for transactions. To make a payment, all you need to do is tap the card at a POS or Point-of-Sale terminal.
Prepaid Credit Card
This card type can be loaded with specific sums of money that you can then use to make purchases or payments. While it’s not technically a ‘credit’ card, a prepaid card allows you to enjoy the same rewards and benefits as popular credit cards.
Reward Credit Card
This card type focuses on rewards such as cashback, loyalty points, travel points, etc. If you have a specific interest or preferred shop where you spend a lot, e.g. travel, dining or even a chain of stores, a reward card can help you save.
Or even classify them according to specific rewards and benefits:
Cashback Credit Card
This card offers 5% to 20% cashback on every transaction, including retail or grocery purchases, utility or phone bill payments, restaurant bills and movie ticket bookings, etc. It’s the ideal option for those who use credit cards for most expenses.
Co-Branded Credit Card
This card is provided by banks or financial institutions in partnership with a travel, retail, sports or lifestyle brand. It offers benefits and rewards from both entities, including discounts on shopping or ticket booking, hotel privileges, etc.
This card offers attractive rewards on entertainment expenses, such as booking tickets for movies, live shows or music events. Typical benefits include ‘buy one get one’, exclusive discounts or extra cashback on ticket purchases, dining, etc.
Fuel Credit Card
This card provides surcharge waivers, cashback or loyalty points redeemable for refueling, shopping/travel/dining/entertainment vouchers, etc., on every fuel purchase. You may collect accelerated or additional benefits at certain fuel pumps.
This card is designed for people who spend heavily on lifestyle-related expenses, such as gym/spa membership, shopping at designer stores and leisure travel. Benefits include airport lounge access, golfing privileges, shopping or dining vouchers, etc.
Travel Credit Card
This card offers domestic and international travel benefits, usually through a tie-up with airlines, travel companies or holiday/hospitality brands. Accumulated points can be redeemed on tickets, hotel bookings and other travel-related expenses.
And lastly, some types of credit cards are designed for specific consumers:
A business credit card is used by entrepreneurs to help them keep their personal and work-related transactions separate. Even though it is meant for business expenses, the card issuer looks at your personal credit history before approval.
An Auto or Metro credit card with low membership/annual fees is useful for commuters in certain cities. Along with offering rewards on top-ups and recharges, it can also be used for shopping and bill payments like any other credit card.
A student credit card comes with perks like low interest rates or access to education loans, and usually requires a parent as co-applicant. This is a good first-timer card to help students learn the nuances of credit card spending, without risk.
Some financial institutions offer credit cards with specific rewards and benefits for female cardholders. Along with basic features, you may get extra cashback/rewards for retail shopping, bonus reward points on travel, fuel surcharge waivers, etc.