Article: Types of Credit Cards - AddUp Rewards

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Types of Credit Cards

by Shane Jacobeen
Types of Credit Cards
There are lots of benefits to using credit cards. With the constant competition for new customers, credit card issuers are constantly creating new incentives to attract potential cardholders. This drives the ever-increasing complexity around credit card benefits. Even though these benefits vary widely from one card to the next, most incentives offered to credit card holders fall into one of three categories.


Among the most common incentives offered to credit card holders is a rewards program. Typically, rewards cards give their cardholders the opportunity to rewards based on their usage of the card. For example, a card may offer 1% cash back or 1 point per dollar spent on purchases made with the card. In addition, rewards cards may offer higher reward rates for specified categories, such as travel or groceries. These category-specific rewards typically range from 2-5 percent cash back, but can be even higher in some cases. For more on rewards cards or tips on how to maximize your earnings from reward categories, see the ‘Related Topics’ below.

Interest Rate

All credit cards have interest rates, but that doesn’t mean you’ll be charged interest for using a credit card. A card’s APR (Annual Percentage Rate) is only charged on balances that are carried beyond the grace period that begins when your billing cycle ends. The length of the grace period and the interest rates themselves vary from card to card, so it is important to know these values before applying for a card. But because billing cycles are typically one month long, so if you pay your entire balance monthly, you won’t be paying any interest.

However, it is not always possible to avoid paying interest. Therefore, it is good to be familiar with the various interest rates a card can have, including:

  • Purchase APR: this is the rate that applies to new purchase on your card each month (but only if you carry a balance beyond the payment grace period)
  • Cash Advance APR: if you use your credit card to borrow cash, a different rate is often applied
  • Balance Transfer APR: If you transfer a balance to your card (from another credit card, for instance), there may be a separate APR for the transferred balance
  • Penalty APR: If you enter a penalty state (often by missing payments, but this varies from card to card), a different APR often takes affect

Some cards offer low introductory APRs for new purchases or balance transfers – as low as 0%! This can be a powerful tool, but be careful – once the introductory period is over, a much higher standard APR usually applies.

Other benefits

This is a broad category, but that can’t be helped: the range of benefits that credit cards offer is truly extensive. The list below provides some examples of benefits (in addition to rewards and APR-related benefits) offered by various credit cards at the time of writing of this article, but is far from exhaustive and subject to change as issuers invent new ways to attract customers.

Examples of credit card benefits include

  • Rental car insurance
  • In-flight purchase reimbursements
  • Checked baggage reimbursements
  • TSA PreCheck or CLEAR membership reimbursements
  • Elevated status with airlines and hotels
  • Food delivery service memberships
  • Reimbursements for streaming service memberships
  • No foreign transaction fees
  • Purchase or device insurance

From building credit to earning rewards, there are a lot of reasons to use a credit card. My recommendation for anyone in the market for a new credit card is to spend time researching various cards to find the one that best fits your needs. Understanding the types of credit cards available is the first step in this process because it enables you to align your search with your current situation and compare similar cards.