7 Types of Credit Cards Everyone Must Know About
If you are think of getting a credit card, the variety of options available in the market can leave you confused. From basic rewards and cashback credit cards to those that offer excellent returns to frequent travellers with air miles and additional benefits, you have multiple options to choose from.
The key to finding the right option is understanding the different types of credit cards and choosing the one that aligns with your preferences- whether it is building credit, earning rewards, saving on travel or a mix of everything. In this article, we will guide you through 5 major credit card categories to help you make an informed decision.
- Entry-level Credit Cards
Most first-time users who have just started with their career might be eligible for entry-level credit cards only. These cards come with low fee and less stringent eligibility terms making them easier to get approved for. Such cards are likely to offer lower reward rate and basic benefits.
Almost all leading credit card providers like HDFC Bank, ICICI Bank, SBI Card and Axis Bank have a few entry-level cards in their bouquet. For example, if you wish to apply for HDFC credit cards, Moneyback, Moneyback Plus, Times Titanium and Times Platinum could be good entry-level options for you. Premium and Super-premium Credit Cards
- Travel Credit Cards
While most credit cards focus on one or two major categories, travel credit cards are specifically designed to cater to the needs of those who travel a lot – both domestically and internationally. A number of travel credit cards are offered in collaboration with leading airlines like Indigo, Air India, Etihad, etc. Whereas, some travel cards offer accelerated returns across all travel spends without any brand restriction.
With the right travel credit card, you can save a substantial amount on your travel spends in the form of accelerated reward points or air miles, complimentary lounge access and hotel stays, complimentary memberships to hotel loyalty programs, low foreign exchange mark-up fee and more such benefits.
- Rewards Credit Cards
When you start your search for a credit card, you will find that most credit cards offer reward points on every purchase. These cards are commonly referred to as Rewards Credit Cards. Every time you make a transaction, you earn a certain number of reward points. Once you have accumulated a significant number of reward points, you can redeem them to get gift vouchers, products or direct cash credit through your card issuer’s reward redemption portal. Some of these portals also provide the option of converting your points into air miles when booking flights or into hotel loyalty points.
Most cards offer accelerated earning on select categories like dining, groceries, movies, etc. while offering rewards at the base rate across all other spends. Since a majority of credit cards in the market offer reward points (at different earning and redemption rates), the choice should depend on the categories where you get the highest rewards. For example, if you frequently dine out, a card that offers 5-times more rewards on dining would be good for you.
- Cashback Credit Cards
As opposed to rewards credit cards that offer reward points, miles or brand loyalty points for every purchase, cashback cards give back a percentage of your spends as direct cash. Cashback cards also come with a base cashback rate, which is applicable across all spends, along with accelerated cashback on select spending categories or brands. For example, Cashback SBI Card offers 5% cashback on all online spends whereas only 1% cashback on offline spends. These cards are suited for those who want hassle-free returns without having to accumulate points first and then redeem them later.
- Co-branded Credit Cards
Several leading merchants collaborate with credit card issuers to offer co-branded credit cards. These cards provide accelerated value-back with the associated brand along with decent returns across other categories. Co-branded credit cards can further be categorized into:
- Co-branded Airline Credit Cards (Indigo HDFC, SpiceJet Axis, Air India SBI Card, etc.)
- Co-branded Fuel Credit Cards (BPCL SBI Card Octane, HPCL Super Saver ICICI, etc.)
- Co-branded Shopping Credit Cards (Amazon ICICI, Flipkart Axis, Titan SBI Card, etc.)
- Co-branded Dining Credit Cards (EazyDiner IndusInd, Swiggy HDFC, etc.)
While selecting a co-branded card, you must consider your brand loyalties as well as the benefits across other spending categories.
Also Read: Why RBI has increased scrutiny on co-branded credit cards?
- Premium Credit Cards
All leading credit card issuers in India have at least one premium credit card in their card list. Premium cards may be invite only or come with stringent eligibility criteria such as high income, existing relationship with the bank with a high TRV, etc. These cards usually offer a high reward rate and an array of travel and lifestyle benefits. You can get unlimited domestic and international lounge access, low forex mark-up fee, golf access to premium golf courses, discount at premium hotels and resorts and more such benefits, which are usually not available on mid-range or entry-level cards.
- Secured Credit Cards
Unlike regular unsecured credit cards, there are some credit cards issued against a collateral like fixed deposit. These cards are suited for people who are looking to build their credit score from scratch or rebuild a damaged credit score, but are not eligible for an unsecured credit card. To get a secured card, you would have to open a fixed deposit with issuer. You can get up to 100% of the deposit amount as credit limit on your secured card.
Besides the card types mentioned above, you can also classify credit cards into more categories like dining credit cards, online shopping credit cards, movies credit cards, etc. depending on their core benefit. When choosing a card, you should consider your eligibility, the primary spending category where you would like to save and other associated terms and conditions.
