You never want to make any kind of financial decision without first comparing your options. The same stands true for credit cards. Today there are dozens of credit card issuers who offer a variety of credit cards. You’ll find cards that offer awesome rewards programs, 0% APR credit cards, and even credit cards that offer cash back.
If you’re in the market for a credit card, don’t choose the first credit card offer that you come across. Keep reading to learn 4 tips for comparing credit cards that will help you ensure that you’re making the right decision.
1. Know the Types of Cards
There are many types of credit cards available today. The first card type is the traditional credit card. The standard credit card often has higher credit limits and can be used to pay for any type of purchase. Traditional credit cards can have a variable or non-variable interest rate, depending on the card issuer.
The second type of credit card is a secured card. These cards require a security deposit but typically have high approval ratings. These cards are best for consumers who have bad or no credit. With a secured card, you can build or rebuild your credit and improve your financial standing for future applications.
The third type of card is a premium card. These cards are often available in tiers (ie. gold, platinum, titanium) and have higher credit limits. The benefit of premium cards is that they offer extra features such as emergency service or travel insurance.
Other types of credit cards to be aware of include:
- Balance transfer
- Low interest
- 0% APR
- Cash back
Before you can choose the right type of card, you’ll need to know what you plan to use the card for. If you want to pay off debt, choose a balance transfer or 0% APR credit card. If you travel often you’ll want to find a rewards card that offers airline miles and other travel discounts.
- Annual Percentage Rate (APR)
All credit cards have an annual percentage rate (APR) which is the numeric value of the card’s interest rate. When choosing between credit cards, APR is one of the biggest factors to compare. APR plays a huge role in how expensive your transactions and monthly payment will be.
If you carry on outstanding balance on a credit card between billing cycle, you will pay interest on the remaining balance. Depending on the credit card issuer, you may be subject to variable or non-variable APR.
Choosing a credit card with a low APR will save you money that would otherwise go towards interest. Unless you plan to never carry a balance on the card, APR is a worthy factor in your decision.
- Know the Fees
All credit cards come with a variety of fees. Some of these fees are worth paying while others you can avoid. When comparing credit cards, you’ll want to look at which fees each card carries.
One of the most common fees is the annual fee. This fee is charged on a yearly basis for having the card. Cards with annual fees tend to offer higher signup bonuses and rewards. Before choosing a card with an annual fee, determine if the savings and rewards offset the cost.
Another fee to be aware of is the late payment fee. While no one anticipates on making a late payment, sometimes it happens. Most credit card issuers have a late fee that’s somewhere between $25 and $35. To avoid late fees, schedule automatic payments so that you never have to remember to make a payment – it’s done for you!
Other fees you’ll want to be aware of are the cash advance fee and the foreign transaction fee. If you plan to take out money on the credit card, you want to know how big of a fee you’ll face on top of the APR. If you travel overseas, be aware of the foreign transaction fee, which generally ranges anywhere between 3%-4%.
- Rewards Program
There aren’t many ways in life to get rewarded for spending, but with the right credit card, you can earn cash back, airlines miles, points, and all sorts of other rewards just for using your credit card. When comparing credit cards, be sure to find a card that offers a rewards program. Consider your spending habits when choosing a rewards program so that you can get rewarded where it matters the most.
Choosing a credit card isn’t a decision to make on a whim. Using these 6 tips you can have the peace of mind that the credit card you apply for is the best one for your financial needs and personal spending habits.