When you’re shopping around for a new credit card, they may seem to all look the same on the surface. But dig a little deeper and you’ll find out that each one has its own unique advantages and disadvantages.
As consumers, it’s important to understand these differences and find the right product that will best fit our financial habits. In this post, we’ll go through five of the most important factors to consider as you compare credit cards.
1. Why Do I Need This Card?
First and foremost, ask yourself this question: Why do I need a new credit card in the first place?
Are you shopping for one because you’re trying to:
- Build up your credit score?
- Perform a balance transfer to a card with a lower intro APR so you can save money on interest?
- Take advantage of a great rewards promo and collect hundreds of dollars in points?
There are several reasons why someone would want to pick one card over another. But ultimately your decision should be rooted in the goal you hope to accomplish. Take a moment to write down why you want a new credit card and put them in order by priority.
2. The Credit Score Needed
Unfortunately, you may not qualify for every type of credit card on the market. Many of the exclusive ones will only approve applicants with Excellent or Very Good credit scores. If your FICO Score is currently only in the Good range or less, then you may run into some difficulty.
A good way to know for sure is to check your credit score ahead of time. Check with a reputable, free website or call your current credit card provider and ask.
3. Rewards Potential
Credit card issuers have gone to great lengths to create rewards packages to attract new users. And if you’re someone who is very responsible at managing your credit, this can be a huge opportunity to cash in.
Most points are redeemable 1:1 as cashback or statement credit. But many can also be converted at higher rates for things like gift cards, hotel nights, or airfare. This can be especially beneficial for people who like to travel.
4. Interest Rates
If you’re someone who doesn’t pay your card off in full, then finding a card with a reasonable APR will be very important. This is a figure which represents the annual interest rate you’ll be charged. (Note that interest accumulates daily for outstanding balances.)
In addition to the base rate, you may wish to look for cards that have special zero or low introductory rates. This can be useful if you have any major purchases upcoming and would like to finance them.
5. Fees and Other Penalties
Not all credit cards are free to use. Some charge an annual fee of $95 or higher. Others, such as premium rewards cards, may charge hundreds of dollars in annual fees.
Additionally, many issuers have extra fees for things like late payments or foreign transaction fees. As you’re comparing credit cards, be sure to take note of these charges and filter out the ones with any fees that you’d like to avoid.