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What's the difference between grade A vanilla beans and grade B vanilla beans? 

 

With grade-B vanilla beans you can make extracts,

 

With grade-A vanilla beans you can make still make very sweet vanilla extract, and much, much more. 

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Should I use grade A or grade B  beans in my vanilla extract? 

Grade-A beans (often called "gourmet vanilla beans") are visually a more beautiful bean. They are plump, pliable and full of fresh vanilla bean caviar. 

Their color is dark and chocolate-like, sometimes with hints of red. The texture is soft due to the higher moisture content that is usually around 30%. They are easily sliced open to remove the caviar for vanilla bean paste, vanilla sugar or any other creation where you want to see those beautiful vanilla speckles. They are rich with vanillin, the natural compound in vanilla that creates the wonderful vanilla smell and taste. Because of their high quality and versatility of use, grade-A vanilla beans are typically more expensive.