Three types of credit cards: Which offers the most benefit for you?

Three types of credit cards: Which offers the most benefit for you?

Credit cards have all kinds of incentives for using them. Depending on what you want from your credit card, some types of cards may be better choices than others. Here, we'll discuss a few types so you can better decide which variety is right for you.

Cashback credit cards

A cashback credit card offers money for using the card, typically as a percentage of purchases.

Not all cashback credit cards operate the same way. Some give you cash back at the time of purchase; others at the time of payment. Some will do both, offering you a percentage upfront and then more when you pay. Many cards, as an introductory incentive, offer a flat amount in return for paying a certain balance in a fixed period of time. For example, if you spend $500 in the first three months of owning the card, you'll get back $100 once.

Generally, cashback credit cards are very flexible in how you can use your earned money. You can apply the credit towards your statement balance or transfer it directly to your bank account. If your bank offers it, you may be able to spend your earned cash back on gift cards at a discounted rate — for example, by spending $15 to collect a card worth $20.

Balance transfer credit cards

A balance transfer credit card offers a low introductory interest rate as an incentive. These are most beneficial when you want to transfer a credit card balance from one account to another, which could be useful if you're mired in debt and want a break from high interest rates. These types of cards typically offer a very small or no introductory annual percentage rate (APR) for a certain period of time to give you an opportunity to pay off what you owe.

Balance transfer fees usually — though not always — apply, typically in the range of 3-5% of the total balance transferred.

Travel credit cards

Like cash back cards, travel credit cards are another type of rewards card focused on perks such as earning miles for airlines, hotel discounts and airport lounge access.

You may receive a sign-up introductory bonus for using the card. Transactions related to travel such as flight tickets, restaurants or hotel reservations commonly offer better rewards than unrelated purchases.

Finally, this kind of card typically offers little to no foreign transaction fees. Other types of cards usually have relatively steep fees for using the card in a foreign country, so travel cards can be very handy if you're often travelling internationally.

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