Types of credit cards

There are a number of different types of credit cards on the market, and it’s important to understand them to choose the one most suitable for you.

There are many ways you might choose to utilise your credit card – you might tap it for daily purchases like coffee or a sandwich, you might keep it aside for grocery shopping and paying bills, or you might even leave it chilling inside a chunk of ice in your freezer, for use only in emergency situations. Just as there are many different uses, there are also many types of credit cards, with a variety of different features.

If you’re considering taking out a credit card or switching from your current one, you may be wondering about the different types of credit cards on the market, how they work, and which one might be the best for you. In this article, we’ll explain the different kinds of cards available, keeping in mind that these are not necessarily distinct types of cards, and some options on the market may share a number of the features mentioned below.

What are the different types of credit cards?

Some of the options available to you can include:

• Low rate credit cards
• No and Low annual fee credit cards
• Rewards credit cards
• Frequent flyer credit cards
• Balance transfer credit cards
• Travel credit cards
• Business credit cards

Low rate credit cards

A low rate credit card is a card with a low interest rate on purchases. This kind of card could potentially be useful for you if you carry a balance from month to month, and are therefore charged interest. These kinds of cards can often be described as ‘no frills’ and generally speaking, will not offer the rewards programs, perks and other bonuses that you might find with more premium cards.

No and Low annual fee credit cards

Credit cards come with a range of fees and charges, and some more premium cards can charge hundreds of dollars a year in fees, if not more. A no annual fee credit card is one that comes with a $0 annual fee, sometimes for a limited promotional period, or sometimes for the entire time you hold the card. These can sometimes come with features like rewards programs, but tend to be more basic than premium cards.

Rewards credit cards

If you want to earn bonuses and perks in exchange for spending, and are confident that you can manage a credit card responsibly, then a rewards credit card could be an option. These cards will allow you to earn points based on your spend, which can be exchanged for various rewards ranging from cash back to retail discounts to frequent flyer miles, but can come with higher fees and interest rates than more basic cards.

Frequent flyer credit cards

A frequent flyer credit card is a specific kind of rewards card that is linked to an airline rewards program, such as Qantas or Velocity frequent flyer. You can earn points per dollar spent on the credit card, which are then transferred to your frequent flyer account. These kinds of cards can come with higher interest rates and fees, but can also feature perks and benefits like complimentary travel insurance and airport lounge access.

Balance transfer credit cards

If you have debt across multiple credit cards, or even just one card with a high interest rate, you can potentially transfer this across to a balance transfer credit card. These cards will generally offer a low initial interest rate on that balance, and some will even offer 0% interest for a period of time, to allow you to pay your debt off interest free. These can help make payments manageable, but it’s important to consider the annual and upfront fees, and the interest rate that the card reverts to after the introductory period.

Travel credit cards

If you’re planning an overseas trip, a travel credit card can offer features specifically tailored to travellers, ranging from no or low currency conversion fees to complimentary travel insurance and the ability to earn rewards or frequent flyer points. There are different travel credit cards that may be more suitable for either occasional or frequent travellers, but it’s important to bear fees and interest rates in mind when considering one.

Compare Travel Credit Cards

Business credit cards

If you often spend on work-related expenses, then a business credit card may be an option to consider. These are cards that can be used to keep work-related and personal spending separate, and can generally be issued to any company or business that holds an Australian Business Number (ABN). Multiple cards can be held by different staff members, and they can come with perks like access to account-keeping software.

Compare Business Credit Cards

How to choose the best type of credit card for you?

Choosing the right kind of credit card for you will come down to your own needs and circumstances, but whatever you choose, it’s important to manage the card responsibly.

One main consideration when choosing a credit card is whether you’re likely to pay your statement off in full each month, or carry a balance from month to month, and only repay the minimum required amount. If you think you’re likely to carry a balance, then a low rate card may be more suitable, in order to save on interest charges.

On the other side of the coin, if you are likely to pay your statement off each month, and you would like to earn bonuses and perks for your spending, then you might consider a rewards card. If you do, it’s worth weighing up whether you will spend enough on the card to counterbalance any fees you’ll be charged.

Likewise, if you are a frequent traveller, either for work or for personal reasons, then a frequent flyer credit card might be worth consideration. You may be able to earn points to put towards perks like upgrades and free flights, and you may also take advantage of features like free travel insurance or airport lounge access, as long as you can manage the fees and keep the card paid off to avoid interest charges.

Learn more about credit cards:

Credit Card Offers & Bonus Deals

How To Apply For A Credit Card in Australia

Should you get a credit card? Is it worth it?

What is a Credit Limit & Does it Matter?

Credit Card Debt: How Does It Work?

What Is A Credit Card Minimum Repayment?

7 Ways to pay off your credit card debt

8 Hacks that could help you earn more frequent flyer points

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