Pros and Cons of Different Types of Credit Cards


Are you thinking of getting a credit card? You will be overwhelmed by the number of credit cards on the market. With the many cards available, it can be difficult to choose the most suitable one for your needs. Most people only know that credit cards are used for shopping. But there is more to it. You also need to find the best credit card that suits you since different credit cards have different purposes.

Read this guide to learn the different types of credit cards available and their ins and outs.

Rewards Credit Cards

These are a type of credit cards that offer “rewards” in the form of points, cash back, or travel miles for every rupee you spend, and it’s at times up to some limit. Such cards are suitable for those who want to pay their balances fully and promptly. Often, reward credit cards are offered to those with better credit.

They are ubiquitous and one of the most common types of credit cards on the market now since they tend to offer awesome perks for those who qualify. Reward cards can be redeemed differently depending on the reason they are being redeemed for specifically. You can either redeem the rewards for statement credit, checks, gift cards, travel perks etc.


  • It lets you earn from the purchases you make, and for every rupee you spend on the card, you get a point. With these points, you can exchange them from the card’s redemption store or use them as points to purchase some products.
  • Offers rebate with the purchases you make which means you will a certain percentage is returned to you when you purchase an item.
  • Additional privileges like travel accident insurance, cash emergency replacement, etc.


  • They can have higher annual fees, which could be very expensive.
  • It’s easier to overspend.
  • Most rewards cards come with variable rates, which can be higher over time, thus becoming very costly.
  • Requires good credit to get more benefits.
  • This may result in overspending.

Secured Credit Cards

This is a type of credit card that is backed up by collateral in the form of a cash deposit. The money is used as a security to the card issuer in case the card holder defaults payments. Typically, the cash you provide as a deposit will be used as a credit limit on your card.

Often, those people with lower scores or poor credit are the ones who can apply for secured cards. These cards help in improving credit scores and establishing credit history.


  • Usually reported to the credit bureaus.
  • Security deposit will only be used when you fail to make payments.
  • It is easier to qualify for and approve.
  • It helps to establish your credit and improve your credit score.


  • Some cards can have more fees.
  • The credit limit is determined by what you provide as security.
  • It may be challenging to find a security deposit.

Business Credit Cards

Business owners especially use business credit cards to help them keep their personal expenses and business expenses separate. The way these cards work is somehow similar to the unsecured cards as they provide access to revolving credit. However, they only differ in purpose of usage which is for covering business-related costs.

Business credit cards can be important to small business owners who require funds to cater for expenses and for tracking them for tax reasons. But, you need to be very careful with these cards since excess usage will lead to extra debt.


  • Ideal for tracking business costs.
  • Helps in building your credit.


  • Failure to make payments can negatively affect your credit history.
  • Comes with usage restrictions.

Low-Interest Credit Cards

Some credit cards offer lower interest rates for the first few months after getting the card. Mostly, the rate will be zero percent or something close for a certain period on balance transfers, but charges high rates for regular purchases you make. As such, it’s not advisable to use this card to make new purchases.

Additionally, there may be fees charged for transfer balances. Though transferring your balance to a card with low or zero percent interest can be essential, you need to be alert in case the rate increases.


  • Balance transfer can help reduce the interest rates.


  • It may come with balance transfer fees.
  • May charge high rates on new purchases.
  • Comes with annual fees.

Prepaid Credit Cards

Though prepaid cards are not entirely credit cards, they can be useful for anyone with no regular banking services or low scores but still wishes to get a credit card. To avail of these cards, you can buy them from a retail location, online, or a financial institution. Whatever the amount you load to the card is what you’ll spend. They are somewhat similar to secured cards, where money is given upfront. But prepaid cards don’t have any effect on your credit since no borrowing is involved.


  • Prepaid cards make it easier to control spending.
  • No interest rate is charged.
  • You can reload your card with additional cash.


  • Don’t have any effect on your credit history or score.
  • Losing the card is like losing cash.


These are just some common types of credit cards available. With their pros and cons highlighted, you will be able to choose a card that matches your needs. Remember, some cards charge high-interest rates, which can be costly. So, make your choice carefully. Nevertheless, you can get an instant personal loan at affordable rates from lendingplate.

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