A credit card can help you get rewards, borrow money and build your credit score. Consumers can choose from many types of credit cards. Credit card issuers are plentiful, and those credit card companies have dozens — if not hundreds — of credit cards available. Deciding which credit card is right for you can feel overwhelming with all of the possible choices. This guide will make your credit card journey easier and help you find the right card for your needs.
Importance of Comparing Credit Cards
Comparing credit cards can help you save money, get the right rewards for your lifestyle, and build credit. Credit cards are important financial products that can help you tap into more opportunities. But credit cards can devastate your finances if you do not stay on top of your debt. Knowing how credit cards differ can help you feel more confident with the card that you choose.
How to Compare Credit Cards in 11 Steps
What should you look for when analyzing a credit card? These are some key factors to keep in mind when searching for the optimal credit card.
1. Understand Your Spending Habits
Your spending habits impact your financial future. Better habits make it easier to achieve your financial goals, but you still have to spend some money. Knowing where most of your dollars go can help you decide on the right credit card for your needs.
Some credit cards offer higher rewards if you use your card for travel expenses. Credit cards that reward miles instead of points can be more beneficial if you go on planes often. But if most of your credit card spending goes toward gas and groceries, you should look for a card that has extra points for those purchases.
2. Annual Fees
You can get a credit card that does not have an annual fee. While some credit cards have annual fees and come with great rewards, you should see whether those better rewards are worth the extra fee. Consumers with low credit scores may also have to commit to a credit card with an annual fee, but there are plenty of credit cards available without annual fees.
3. Interest Rates
Even if you stay on top of your debt and pay everything on time, you should still know your credit card’s interest rate. There may be a time when you can’t make an on-time payment or forget about paying your credit card. A higher annual percentage rate (APR) increases how much you owe if you carry a balance from month to month. Picking a credit card with a lower interest rate can make your credit card debt more manageable.
4. Rewards and Benefits
Credit card issuers use reward programs and benefits to stand out from competitors. While many credit cards offer rewards, which can seem similar on the surface, slight differences can impact your total benefits.
The difference between 1% cashback and 2% cashback is substantial when you use a credit card for several years. Knowing how points and miles convert into cash can also help you compare rewards and benefits. Some credit cards come with insurance policies, purchase protection, airport lounge access and other perks.
5. Sign-up Bonuses
Some credit cards give sign-up bonuses for consumers who spend a certain amount of money within the first few months of opening the card. For instance, you may find a card that offers 10,000 bonus points if you spend $9,000 or more within the first three months. These sign-up bonuses incentivize you to spend money on your credit card right away. Some people time their credit card searching process with high expenses on the way. This strategy makes it easier to qualify for sign-up bonuses.
6. Introductory APR
You should keep an eye on what the APR will be after the introductory period expires. You don’t want to be surprised by a high-interest rate.
However, a 0% introductory APR makes it easy to stay on top of your debt. You won’t have to worry about any accumulating interest while the introductory APR remains in effect. If you have a high balance, you can transfer your credit balance to another card that has an introductory 0% APR.
7. Credit Limit
The credit limit indicates how much money you can spend on your credit card before issues arise. A higher credit limit increases how much you can borrow before you must pay back the credit line. A higher credit limit can also improve your credit utilization ratio, a component that makes up 30% of your credit score.
8. Foreign Transaction Fees
Foreign transaction fees can increase the cost of international travel. Some credit cards have lower foreign transaction fees or none at all. If you travel to various countries, you should look at this fee before choosing a credit card.
9. Credit Card Issuer
Some credit card issuers are more reputable than others. You can read online reviews to see what people think about their credit card issuer. Many people share their experiences online, which can help you make a better choice.
10. Eligibility
Some credit cards have requirements that revolve around your credit score, how much you spend each year and other factors. You should review a credit card’s eligibility to see whether you qualify. Applying for a credit card you don’t qualify for will result in a hard credit check.
11. Terms and Conditions
The terms and conditions document is lengthy and filled with legal jargon, but it explains your rights as a credit cardholder. Reviewing this document can help you understand the fees, penalties and other details associated with the credit card.
Searching for the Right Credit Card
A credit card opens up more possibilities, but some credit cards are better for your lifestyle than others. People who travel often may want to rack up miles instead of points on their cards. Knowing your parameters can help you discover the right credit card. As you compare choices, you will have a better understanding of what you want from a credit card.
Frequently Asked Questions
What should I look for when comparing interest rates?
You should look for credit cards that have the lowest interest rates and 0% APR introductory rates.
How do I compare credit cards effectively?
You can compare credit cards effectively by having an idea of what you want, establishing criteria and then using your parameters as a guiding compass.
How important are credit card rewards and benefits?
Credit card rewards and benefits can save you a lot of money or let you access new opportunities. Rewards and benefits are important, but they are one of many factors to consider.
About Marc Guberti
Marc Guberti is a personal finance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.