A guide to different card types

These days, it's not uncommon to find your wallet filled with everything except cash. There are numerous cards you can use to make payments, each with its own features, benefits and risks.

So what are the different types of cards available? By understanding what’s available, you could enjoy perks like rewards, cash back, and more.

What are the traditional card types?

When you think about payment cards, you probably imagine credit and debit cards. These cards are the foundation for everyday transactions, ranging from online shopping to withdrawing money from an ATM.

Banks and other financial institutions work with card networks to offer different types of cards to their members. The card networks are responsible for transferring money from the consumer to the merchant, while the bank (known as the card issuer) is responsible for managing the account.

Debit cards

Debit cards connect to a specific account from a card issuer, allowing an account holder to draw money directly from available funds in that account. An account holder needs to have money in their account to use a debit card and can typically only spend as much as what is available.

There are also prepaid debit cards that are loaded with a specific dollar amount and only allow the user to spend what is on the card.

Credit cards

There are many types of credit cards, including cards issued by banks or credit networks and co-branded cards offered by retailers or other businesses.

No matter the type, credit cards allow shoppers to spend an advance of money and pay it back later. Some credit cards also allow shoppers to access special promotions like rewards and lower interest rates, though they may charge an annual fee.

Importantly, if the balance is not paid when it’s due, a cardholder will likely be subjected to various interest charges and fees. Account set up fees and other associated costs may be involved. It’s important to ensure a purchase is affordable and consider how repayments will be made.

Charge cards

A charge card is similar to a credit card but with one important difference: a cardholder must pay off the entire balance in full each month. Although this might help cardholders to avoid interest and fees, not everyone has the cash available to pay their card off in full each month. Charge cards are offered by banks, credit networks, or other businesses.

Other cards

Though traditional card types remain popular, there are also payment cards that aren't physical.

For instance, these three types of cards only exist electronically:

• Virtual cards. Virtual cards are like credit cards, with a unique card number, expiration date, and CVC. The only difference is they don’t exist in a physical form.

• Digital cards. A digital card is the digital version of a payment card and will always include an accompanying physical card.
• Disposable cards. These cards are like prepaid cards that you can load into a digital wallet. Once the money is spent, the card number can't be used again.

Things to keep in mind when evaluating different types of cards

Here are some things to consider when evaluating different types of payment cards:

• Fees. Check to see if the card charges any annual or monthly fees, along with fees for services like cash advances, late payments, balance transfers, and foreign transactions.
• Interest rate. If paying off a card in full each month is not an option, compare applicable interest rates and charges.
• Rewards. Some cards can offer benefits like discounts, cash back, rewards points, or airline points. Some cards offer more rewards based on spending habits. For example, some cards offer more points when shopping at certain retailers.
• Credit limit. Choose a card with the right limit for you and your financial siutation. However, be careful to avoid falling into the trap of spending beyond your means. To reach your personal budgeting goals personal budgeting goals, it may make sense to choose a card with a lower limit to avoid overspending.
• Credit requirements. Different card types require different levels of credit scores. Different banks and credit providers may also have different standards. By knowing your credit score, you can consider cards that are designed with your credit level in mind.

It’s possible to securely store debit and credit cards in the PayPal digital wallet.