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Types of credit cards: A comprehensive cheat sheet

By , CardRatings contributor
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Choosing the best credit cards for your wallet is a strategic way to save money, score perks, and build a strong credit profile. But like most things these days, consumers have a ton of choices when it comes to plastic preferences, which is why it's important to evaluate your options.

"People don't realize how much credit card deals change over time," says Liz Weston, personal finance columnist and author of "Your Credit Score."

It makes sense every year or so to look at your portfolio and see which cards you've outgrown, and research other options, she says.

"Our spending patterns change over time, and therefore, the desire for different types of rewards change, too," she adds.

Consider the following cheat sheet as your starting point to shopping around for your next credit card.

Secured cards

What they are: Secured cards are geared toward people with poor credit or no credit history. Secured cards work like any other credit card, except that the consumer has to leave a deposit in the amount of the credit limit. Otherwise, the lender wouldn't be willing to take a risk on extending that credit. Limits are usually $500 or below, interest rates are high, and there may be additional fees associated with opening the card.

Who they're for: Although secured cards are for people who have not been able to demonstrate responsible credit use in the past, "it's not a slam dunk," says Weston. "People do get turned down for secured cards." Do a little research when you're applying to make sure you'll qualify. For instance, the terms or conditions might say you won't get approved if you've had a bankruptcy in the last year or two, says Weston.

The fine print: Some secured cards don't report to all three credit bureaus (Experian, Equifax, and TransUnion). Since the whole point is to have your good behavior reported to improve your score over time, this is an important question to ask up front, says Weston.

Cash-back cards

What they are: Cash-back credit cards enable customers to earn money back on purchases. These rewards cards essentially pay back a certain percentage of every dollar spent. "Cash back cards are always a good deal," says Wayne Sanford, author of "The Real World of Credit." Just be sure you're responsible enough to pay the bill off every single month, otherwise you'll pay more in interest than the cash-back rebate is worth, he says.

Who they're for: Cash-back cards are a good fit for most anyone because of their simplicity. "You don't have to keep track of blackout dates, and there's no hassle with trying to use your points," says Weston.

The fine print: Generally the purchases you make on the card will result in you earning a 1 to 5 percent cash-back bonus depending on the card and your usage, says John Ulzheimer, credit expert for CreditSesame.com. "Cash back can be used as statement credit, to buy merchandise or gift cards, or refunded to you via a check," he adds.

Co-branded cards

What they are: "Co-branded credit cards are general use credit cards that earn rewards for specific retailers," says Ulzheimer. So you may use the credit card and rack up thousands of reward points, but then have to redeem them with the retailer with which the card is co-branded.

Who they're for: If you do a lot of shopping with one specific retailer - such as Amazon or Target - it can make sense to apply for this type of card.

The fine print: These cards are only worthwhile if the consumer frequents that co-branding retailer often. Otherwise, the rewards will go wasted, says Ulzheimer.

Retail cards

What they are: Retail store cards are credit cards that can only be used at a store or a chain of stores (such as Macy's). You've probably been asked by store clerks to apply for such credit cards 100 times, with the store offering some sort of promotional discount just for applying.

Who they're for: Only the most loyal shoppers of a particular store, who are diligent about paying their bills in full each month, says Ulzheimer, will benefit from store cards.

The fine print: Retail credit cards almost always have much higher interest rates than their non-retail peers, says Ulzheimer. However, store discounts that are available only to card users could still make it a good value for savvy shoppers, says Weston.

Airline cards

What they are: Generally the purchases you make on an airline credit card will result in you earning miles or points, says Ulzheimer. "Those rewards can be used to purchase airfare, upgrade from coach to first class, or buy merchandise."

Who they're for: If you aren't flying 25,000 or more miles on one airline, these cards make less sense, says Weston, as it's hard to rack up enough points to for a rewards flight or upgrade. Except for frequent travelers, most people are probably better off in another category of travel rewards cards.

The fine print: Make sure you fully understand the introductory bonus miles, says Sanford. "They may give you 30,000 miles, but you might have spend a certain amount of money within the first three months of having the card," he says. Another to-know: For times when points and miles will expire, there is usually ways to keep them alive, says Weston, such as doing your online shopping via the airline's merchandise portal. "When in doubt, just make a phone call and say 'I want to transfer some points,' and often you can apply them elsewhere," she adds.

Hotel cards

What they are: Like airline cards, hotel cards are co-branded credit cards. These cards are connected to hotel rewards programs, and purchases you make using hotel cards will result in your earning points that can be redeemed for rewards stays at certain hotel chains, explains Ulzheimer.

Who they're for: If you're not getting enough value out of an airline card, look at hotel card, says Weston. "There's typically no blackout dates, and since hotels usually have a lot of inventory they don't sell, you can book anytime," she says.

The fine print: Hotel cards are generous, and usually flexible about dumping points in and out. Some cards automatically start you out at top status, so you don't have to jump through any hoops to get extra goodies, like a welcome basket at check-in, or a dedicated check-in line to speed up the process, says Weston.

Before you apply for the next credit card offer that hits your mailbox, think about your credit history and purchasing preferences to find the card that will give you the most benefits for your needs.

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