With your average credit card, credit is the main benefit. You can borrow money to meet payments, but you need to return it within 30 days to prevent late fees. However, you might still pay interest for that at the end of the year. So you’re paying to use that card.
Missed payments can hurt your credit score, which means you have to pay more for credit.
But that’s not all. Businesses pay a protection fee whenever you pay with it. That’s why many charge you 3-5% more for choosing that payment method.
Due to all those limitations, it doesn’t make sense to keep using them unless you get something from it. Here are 8 types of cards, some of which will pay you to use them.
Types Of Credit Cards
#1 Cashback Cards
With so many options out there, it’s hard for companies to get new clients. One solution they’ve found is offering more benefits to their users, so they stay with them for longer. And because these buyers spend years with them, banks end up ROI positive, even after giving +$1000 in rewards.
Typically, these have an APR of 14-24% and no annual fees. Many include welcome gifts, such as hundreds of dollars in cash after you spend a certain amount.
A card worth mentioning is the Discover It Cash Back with crazy benefits:
- 0% APR for 14 months, 12-23% thereafter
- Earn 5% back when buying from major retailers, Amazon.com, groceries, restaurants, gas stations, and paying with Paypal
- Earn 1% for every other purchase
- By the end of the first year, Discover It will automatically match the cash back you earned, dollar for dollar. If you accumulated $1000, it turns into $2000. Which turns it into 10% cash back the first year
- Any members with 700+ credit score qualify
Cashback cards can build your credit score when:
- You pay your APR on time
- You pay what you borrow within 30 days
- You keep the card active (history length)
For the best cashback rewards, you need a higher score to apply. Nothing should happen if your credit drops after you get the card, but the company might freeze it until you rebuild your score to their minimum required.
Fees and Interest Rates
- Balance transfers cost 3-5% of the amount
- The APR can vary from 12 to 24% by the end of the year
- Yearly fee, which is often zero or waived the first year
- Typically, no fees for closing your account
Tiers and Limits
Each company has different limits, which you can increase by getting a higher card tier. Premium Class requires you to have a higher minimum balance and credit score. The usual limits are:
- $300 per day for ATM withdrawals and a bit less from banks from other branches (up to $3000 if premium)
- Your daily purchase limit is $3000 (+$10K if premium)
- Depending on your credit history, you can get $3000 to $10K from your card lender
The best rewards are either limited to high-credit-score users or for the first year only. And if a reward program is too good, there will be a limit on how much cashback you can claim per year. On top of that, most have high APR and balance transfer fees.
If you’re a big spender, you must use these cards, preferably the higher tiers. If you qualify, you could save thousands of dollars, maybe every month.
Not all cashback cards affect your credit. You can find debit cards with no interest or yearly costs AND get 1-2% rewards.
To max out your savings, consider using the Curve card. This *free product combines all the cards you have into one, and you get an extra 1% when you pay with Curve. That adds up to whatever cashback you already receive from your other cards. Check the conditions first.
#2 Travel Cards
From a generic perspective, all reward cards are the same, whether it’s cash back or travel oriented. The difference with travel cards is, you get more value from your money.
Say you spend $100 with your card, which could mean a 1% cashback, or $1. But with these, your dollars could be worth 2x or 3x depending on how you spend them (also called points). That’s how you triple your returns for airlines, hotels, dining, and entertainment.
Then why would a company make such an offer? Because it’s a highly-targeted one. Unless you’re a full-time traveler, you won’t get the most value from it.
Most cards have annual maintenance fees, which will hit your score if you delay their payment. You also need to pay back any amounts you borrow. But as a responsible buyer, there’s nothing to worry about.
If you want to expand your card variety, make sure you start early. Your credit history is the average length of all your cards. Also, the score decreases a bit temporarily whenever you make a hard inquiry/ open a new credit card.
Fees and Interest Rates
- Annual fees range from $0 to $500 (but $90 is the standard)
- Most start with 0% APR, ~20% thereafter
- For a 3% fee in ATMs, you can get a cash advance. But if you don’t pay off on time, interest rates can be from 15 to 26%
Tiers and Limits
Travel cards are useful for international payments an/d ATM withdrawals for different currencies. Better cards require higher scores and yearly payments but will offer:
- Lower fees
- More currency conversion options
- Better travel perks and multipliers (usually up to 5x)
- Higher ATM withdrawal limits (up to $3,000 per day)
Companies can change the rewards anytime. Even if you sign up early, there’s no guarantee you will keep your benefits. Anytime, the brand can change the multipliers or exclude perks.
New companies generally offer the best rewards since they need more users. But after they get a loyal customer base, they reduce those benefits to increase profit margins.
Travelers should use these cards as often as they can. If you like to spend money on hotels, dining, and airlines, these programs are a steal. For 3x-5x, you’re getting free money, often with no yearly reward limit.
If you find a good card with no maintenance fees, it certainly won’t hurt you to get one. Even if you don’t travel much, it might be useful one day.
#3 Student Cards
Why do you think banks would invent cards for students? These groups have often limited/zero income, low expenses, and no credit.
But because they are students, they are more likely to increase their income after they graduate. And students prefer to stay with one company simply because it’s the first one they signed up for, even when there are better options. So if students opened a credit card, they would likely become long-term clients for that bank.
You can qualify with a low or null credit score, but you must be currently in college to apply. If they approve it, you can enjoy 1.5x travel points, gift cards, welcome gifts, cashback, and more.
This group doesn’t have much credit history, so there’s nothing wrong with opening more credit lines. And because most students have none, it’s a great opportunity to build your score while getting fair rewards.
Fees and Interest Rates
- Most student cards have low fees and no annual payments required
- Standard APR rates apply after the 0% APR period (about 7-12 months)
Tiers and Limits
Because students have no income nor credit, there aren’t any card tiers other than Standard. It includes all the limits of a conventional credit card, depending on what bank you choose.
Some of them offer the same cards but adapted to students, such as the Discover It Student Cash Back. It allows them to get the 5% cashback with fair or no credit.
It may not be the best idea to offer credit services to zero-income users. When students can’t make money, it’s really easy to fall into debt or ruin your credit score. And card interest can be as high as 25% per year.
And you can’t enjoy the rewards forever. You need to re-apply for it after the card expires. And if you already finished college, you no longer qualify.
If you miss payments, those mistakes will stay on the reports for seven years. It’s better to either not borrow, get an income stream first, or not apply for the card. Yet, every student will have a different financial scenario.
If you’re in college and want to start building your credit, student cards offer more benefits. If you need money right now, try alternative methods before borrowing from your card’s lender.
Imagine you get this card your first year in college. By the time you graduate, you already have years of credit history, even if you didn’t use it much.
#4 Business Cards
When you get a business credit card, it’s easier to organize your personal and business data. But these cards also offer better terms you wouldn’t qualify for otherwise.
They are a combination of the previous ones, offering everything a business owner may need: travel perks, cash back on business categories (office, online ads, subscriptions), and higher credit limits.
You need to spend money on your business sooner or later. And if you do it with these cards, you can get thousands of cash rewards as welcome gifts. To qualify, you may need a document to verify your business, plus a 690+ credit score.
Business credit card users have a different credit score value for their business. This value allows small owners to get better terms for borrowing money. The downside is: most banks back business credit cards with personal guarantees.
That means that YOU will be liable for your business debt if you don’t meet payments on time. And just as your business score can boost your own FICO score, it can also make it drop.
It isn’t a problem if you’re financially responsible. But there’s no guarantee a business will succeed, which puts your personal score at risk.
There’s a card requiring no personal guarantee, but you need a balance of $100,000 to get it. Anybody can qualify for the Brex Card For Startups (300-850 score), and the benefits are many:
- Waived card fees for life
- +$750 worth of rewards
- 7 points per dollar for rideshares (Uber, Lyft…)
- 4 points per dollar for travel and 3 for restaurants
- 2 points per dollar in recurrent software billing and 1 for everything else
Fees and Interest Rates
- Yearly fee of $0, $99, or $199 (varies with the brand and tier)
- Standard APRs starting at 0%
Tiers and Limits
Some premium cards call themselves “business cards,” meaning only high-cashflow clients will use it. And because running a company can be expensive, these cards offer more spending power to their users:
- $500 fee-free withdrawals on ATMs (up to $3,000 or more)
- Credit loans are proportional to the revenue your business generates, not your income
- Your credit limit increases as your score improves and your business grows
Business credit cards don’t have as much purchase protection as personal cards. And when it comes to consumer habits, you will save much more with a standard or cashback card.
Because lending to businesses is risky, these have higher interest rates, APRs, and annual fees. If you can’t pay those, they will affect your personal credit score long-term.
Most business products are charge cards. So you can borrow interest-free money as long as you pay it off before the end of the month. Provided that your business already makes money, this could be the card you need to solve cash-flow issues.
Mind that the best loan terms will depend on your credit score. But if yours is excellent, then it’s all pros.
You don’t require a business credit card to run your business, but it might be more beneficial than your standard one.
Most cards you open are unsecured, which means you can keep the balance you want (even $0). But the best ones have high credit requirements to qualify, which leaves low scorers with few options. Because of it, it’s risky for lenders to offer them money.
The solution? Have a minimum balance required. Lenders can use it as collateral, so when you don’t repay on time, they use your balance instead. You need that minimum value to keep the credit card active. Otherwise, they can close it.
Subprime cards have the same features, requiring a $100-$500 deposit and much higher interest.
If you can afford the minimum balance, then you can open a card like these to rebuild your credit, no matter how low your score is.
This product targets low-credit individuals, so you really can’t expect many score penalties here. Instead, you back up your card with that money, which allows you to repair your score or start building (if you never had one):
- Pay your balance on time every month (if not, add 1/12 of your card APR)
- Keep your credit utilization rate low
- Build up your credit length history
Fees and Interest Rates
- APR rates go from 14 to 25%, although you don’t need to pay interest when you pay your balance in full every month
- Missing payments can accumulate +20% interest and up to 30% in penalty fees
- Fees apply depending on the operation you make (e.g. balance transfers, foreign transactions)
- Annual maintenance fees rarely go over $50
Your spending and borrowing ability is much lower. You can only borrow as much as you keep in your minimum balance. So if that number is $500, that’s as much as you can get.
Despite the benefits, a secured card doesn’t remove the problems of having bad credit (higher interest).
There aren’t any benefits worth keeping with secured cards, but at least you can use credit even with a bad score. Use this card as a tool to rebuild your credit, and as soon as you can qualify for better ones, close it.
#6 Limited purpose cards
We know what you’re thinking. It’s not fair to give worse terms to low-score borrowers just because they are a higher risk. The more we can help them, the sooner they will improve their credit.
The question is, how do we know they will use that money the intended way? You have to restrict how they use those funds to minimize risk. And upon this realization, they created limited-purpose cards.
Governments use the so-called ***EBT cards***, so you can only pay with them at gas stations, restaurants, supermarkets, and groceries. It ensures that those who receive social benefits use them the right way — although people always find loopholes (more about food stamp scams here).
Companies also use them, so you can only buy from their selected brands.
These rarely affect your credit. You’re not supposed to borrow or deposit money here, only to receive and spend it. But in some cases, you can pay other debts using the balance of your limited-purpose card.
Fees and interests
These cards serve as rewards systems. You don’t pay any fees because you can’t deposit anything in the first place.
Limits and Tiers
If you think about it, most of the cards we reviewed are for “limited-use:”
- Travel cards only apply for travel-related expenses
- Only students can apply for student cards, just as entrepreneurs can apply for business credit cards
As for the EBT card, the Government will review whether you deserve the benefits or not. So it depends on your medical condition, military background, annual income, number of family members, among others.
Obvious? You can’t spend your money freely. Those who run the benefits program decide where you can spend and how much you earn. There’s no guarantee you will keep those points because they can change the system anytime.
The Ideal Scenario
If you have bad credit, chances are you’re in financial hardship. You might qualify for benefit programs, which will help you with supplemental income until your situation improves.
None of these cards have annual costs or fees. So the more of them you can get, the better.
#7 Crypto Cards
With everything going on this year, we can’t ignore the rising popularity of cryptocurrencies. Many companies now offer cards with their own transaction system, and they reward you for using them.
The concept of credit may sound abstract, let alone crypto credit cards. But using these products is as easy as paying with your normal card.
You go to the supermarket, use your crypto card, enter the pin, pay, and get cash back. Or you buy something online and enter your number: payment complete.
The selling point depends on the company. For example:
- Most companies have their own coin. You can stake their cryptocurrency for months and earn interest later
- Your crypto-balance converts to fiat currency automatically whenever you buy something
- You can play with the values of each currency, selling high and buying low
Or if you don’t like risk, you can still keep all your funds in USD, EUR, GBP, or another fiat.
There’s not much regulation in the crypto-world yet, so the way you use your money won’t affect your credit. You neither need a credit score to qualify.
But if you want to borrow, you need a collateral amount (just like secured cards) with the lender’s coin. So you need to hold CRO to borrow from Crypto.com, SXP for Swipe, TKN for Monolith, and so on.
The more you stake, the more you can borrow.
Fees and interest
It can be tricky to borrow cryptocurrency when values change all the time. The lending amount sets in your default fiat currency, and if you pay on time, there is no interest.
- APRs change with card tiers, although we’ve found them as low as 5% and not higher than 12%
- There’s a free amount you can withdraw from the card per day. A 2-3% fee will apply after that
- The company adds about 3.5% for currency conversion
- There’s usually an option to halve all the fees if you stake their coin or pay with it
Tiers and limits
The major exchanges don’t offer card upgrades for the moment (CoinBase, Binance, Bitpay). The best products come from Crypto.com and Swipe.
They both have 5+ cards, ranging from 1% to 8% cashback rewards plus perks. For applying, they only consider how much you stake and your location. But in the future, these companies plan to deliver worldwide.
- Fee-free ATM withdrawals up to $200 per month. Maximum monthly limit of $2000 (or $10K+ if premium)
- Card spending limit of $3,000 per day and $30,000 per month (with high tier, that’s $10K+ per day and $100K per month)
- There is no limit to how much you can send or receive
The lowest tier is always free and requires no staking. For the highest tier, you’ll have to hold 100K-$250K for, at least, six months, risking your money with the daily market swings. In Crypto.com, you can still get the highest tier without staking, but you lose most travel rewards (and the cashback halves).
Although these companies encourage you to do so, you shouldn’t keep large amounts in these cards. There are no annual fees or interest, but here are the problems:
- You can lose your account. If you do something that goes against the TOS or the brand doesn’t like (e.g. profiting from currency exchanges), they block your account without warning. The same can happen if coins grow a lot. Because they don’t want their clients to sell and leave
- Not all businesses accept these VISA cards. Sometimes, it charges you after rejecting the payment. It doesn’t return to your balance until several business days later
- Once you choose your tier, you can’t switch to another one
- With cards like Swipe, you can only hold cryptocurrencies. So your balance may be worth 2x tomorrow or lose 1/2 of its value.
Because of the great cashback, you should use these as often as the cashback cards from your bank. It doesn’t affect your credit, so you can spend money without risking your score.
You can potentially move dozens of thousands a year without the knowledge of the IRS. Regulations will change, but cold wallets will still be a thing.
#8 Debit Cards
Although it’s not precisely a credit card, many people don’t know the difference. Yet, these products may be more popular than credit itself.
Also known as prepaid cards, it’s the simplest payment method you could expect. You buy things with the money you deposit. If you don’t have enough, you can’t buy. It’s impossible to run into debt.
None. It’s only for payments. Debit cards can’t build or ruin your credit score.
But you can do it indirectly. If you have bills on your credit card, you can get that money from your debit card.
Fees and Interest Rates
- You don’t pay anything for managing your own funds
- Banks may have maintenance fees. But they will waive them if you keep a minimum balance
- There’s no annual charge or interest
- You still pay for fees when withdrawing from out-of-network ATMs
- A fee applies when you use PINs to confirm transactions
Tiers and Limits
The classic debit card is more than enough for its purpose.
- There’s a monthly expense limit, but you can raise just by calling your bank
- They have the usual ATM limit, about $500 per day
- If you upgrade your card, you get higher ATM withdrawal limits, discount vouchers, travel points, & cashback
Credit cards have a 21-25 grace period before a payment is due. That allows you to open disputes, request refunds, and discuss errors. But debit cards don’t.
Once you pay, the funds leave your checking account immediately. If someone uses your card without consent, it’s harder to retrieve that loss.
Debit has very few benefits, which makes it a con. If you don’t have debt problems, you should keep a debit card with more money than what you spend per month. You’re not building any credit, and all that extra money could be in a credit card instead.
The Ideal Scenario
Use this card to freely spend money without worrying about fees or interest. If you don’t spend much, lower the spending limit. So if someone steals your account, they can’t withdraw more than that amount.
Debit is free and you set whatever purchase limits you want. That makes it a perfect emergency card in case you can’t use credit.
Can You Pay a Credit Card With Another Credit Card?
Did you know you can use a credit card to pay off another one? Technically, this shouldn’t be possible. The only accepted payment methods are bank transfers, money orders, and checks. And there’s one exception: balance transfer credit cards.
Anyway, why would anyone want to do this?
Suppose you borrow $5,000 with your credit card, which has a percentage annual rate of 20% (APR). Your interest is $1000, but you don’t pay for it until the end of the year.
But maybe you just opened another card with 0% APR. That means you pay no interest for, at least, 12-24 months.
You can save money (or time) by transferring that $5K from the 20%-APR to the 0%-APR card. This way, by the end of the year, you don’t have any interest to pay.
Most cards offering 0% APR only do it for the first year, though.
But saving money isn’t as easy as it sounds.
- They may charge you a ~5% fee when making a balance transfer. That’s a considerable number when moving large sums. Make sure the transfer makes sense for the amount you’re going to send, how long you’re going to keep it, and what the card interest rate is
- You need to reach a certain credit score to qualify for balance transfer offers. If your score is less than great, the cost may not be worth it
- The 0% APR period only wins you time. It’s not doing anything to pay off that interest. You still need to face it sooner or later
Only use balance transfer credit cards if you can tolerate the cons. The only thing we disrecommend is cash-advances because the interest rates you’ll pay are much higher than your card’s APR.
Should You Sign Your Credit Card?
Do you sign on the back of your credit card? If you didn’t — and you only use it for online payments — chances are you haven’t noticed it’s deactivated. For physical business, your card isn’t valid until the back is signed.
But there are other reasons you might want to add your signature:
- There’s a message behind: “Not valid without an authorized signature.” Some businesses will reject your card if you leave it empty
Then why does it work online? Because you’re only entering the numbers. There’s nobody to check for the signature, so they assume your card is valid.
- “See ID” doesn’t work very well. This phrase is a security layer to prevent others from using your card without consent
The idea is that you show the seller your ID card, so they can verify your name and signature. However, sellers can’t ask for these documents because certain merchant agreements prohibit that. And without the signature, they won’t accept the card. Which makes the message useless.
- There is no risk in sharing your signature. Some people fear that thieves will forge their signatures. But even if they do, they can’t access or use your financial data. The moment you detect suspicious activity, you can freeze the card
In short, signatures are only a requirement and rarely do anything for your security. If that’s your concern, your biggest risk is phishing traps and card skimmers. To avoid the last one, beware of whom you give your credit card and learn how to avoid ATM scams.
Which Card Should You Get?
Before you make the decision, here’s what to consider:
- Opening more credit lines boost your overall score, but in the short term, it will lower
- If you can’t keep up with your card bills, that debt will ruin your score
- More credit lines protect your credit history length. If you open a second credit card, the length cuts by half. If it’s the tenth one, it barely reduces
- Your credit utilization limit increases as you add more credit lines, which lowers your utilization rate
If you can afford it, then why not? That doesn’t mean you need to make your finance super complex. You can have ten cards but only use two. And you can always downgrade the ones you don’t want.
Aside from boosting your score, more cards mean more welcome gifts and bonuses (see credit card churning).
To keep a high credit score, what matters the most is paying on time. And the way not to miss payments is to organize. Keep personal finance simple while having as many credit lines as you can manage.