Types of Credit Cards

Most major credit cards—which include Visa, Mastercard, Discover, and American Express—are issued by banks, credit unions, or other financial institutions. Many credit cards attract customers by offering incentives such as airline miles, hotel room rentals, gift certificates to major retailers, and cash back on purchases. These types of credit cards are generally referred to as reward credit cards.

To generate customer loyalty, many national retailers issue branded versions of credit cards, with the store’s name emblazoned on the face of the cards. Although it’s typically easier for consumers to qualify for a store credit card than for a major credit card, store cards may be used only to make purchases from the issuing retailers, which may offer cardholders perks such as special discounts, promotional notices, or special sales. Some large retailers also offer co-branded major Visa or Mastercard credit cards that can be used anywhere, not just in retail stores.

Secured credit cards are a type of credit card where the cardholder secures the card with a security deposit. Such cards offer limited lines of credit that are equal in value to the security deposits, which are often refunded after cardholders demonstrate repeated and responsible card usage over time. These cards are frequently sought by individuals with limited or poor credit histories.

Similar to a secured credit card, a prepaid debit card is a type of secured payment card, where the available funds match the money that someone already has parked in a linked bank account. By contrast, unsecured credit cards do not require security deposits or collateral. These cards tend to offer higher lines of credit and lower interest rates vs. secured cards.

How do I get a credit card if I don’t have any credit?

Building credit history can be a bit of a catch. If you don’t have any credit, merchants or banks are less likely to extend credit to you since you’re an unproven borrower. Opening a secured credit card is one of the simplest ways to get started. Since spenders are only borrowing from the money they put down as a deposit, there is little risk for the lender, and it gives them a snapshot of your spending and repayment habits.

Another way to start building credit is to become an authorized user on an established credit account, such as a parent or spouse. The cardholder’s credit history will appear on your account, adding longevity to your credit report. But be sure that the person with whom you partner has good credit habits. If their financial choices are poor, that will also reflect on you.