How to compare credit cards
A credit card is more than just a safe and fast way to make payments. When used responsibly, it can improve your financial health and bring a lot of value to your wallet and life. But it has to be the right credit card. And with thousands of options to choose from, it can take time to find your perfect match. That’s where we come in.
The right credit card for you will depend on a lot of factors. These days, credit cards can come loaded with perks. You’ll need to look at the card’s benefits and features to find the ones that matter most to you. You’ll also need to know your credit score and spending habits.
To help you sort through it all, our CardMatch™ service matches you with personalized offers for credit cards. Just answer a few questions, and we’ll do the work for you, analyzing the best options from our partners to create a list of credit cards made just for you.
Want to learn more about how to choose a credit card? Here’s a closer look at the important factors to consider when comparing credit cards.
If you want to apply for a credit card and get approved, you’ll need to know your credit score and compare it to the credit card’s recommended credit score. There are a number of credit scoring systems, but the most widely accepted comes from FICO, which uses a credit range from 300 to 850. Here’s how it’s broken down:
- Credit cards for excellent credit require a FICO credit score of 740 to 850.
- Credit cards for good credit require a FICO credit score of 670 to 739.
- Credit cards for fair credit are for FICO credit scores of 580 to 669.
- Credit cards for bad credit are for FICO credit scores of 300 to 579.
If you apply for a credit card you’re overqualified for, your application is likely to be accepted, but you won’t be doing yourself any favors. Some credit cards have lower interest rates and better perks which you’ll miss out on. And if you apply for a credit card you aren’t qualified for, you’re likely to be denied. On top of that, the credit card issuer will perform a hard credit check on your credit report, which will cause your score to drop a little bit with each application.
There are a number of ways you may be able to get your credit score for free. Thanks to Experian’s VantageScore and the FICO Score Open Access program, hundreds of financial institutions are able to provide free credit scores to consumers, including your credit card issuer. For more information, check out how to get your credit score.
Rewards credit cards typically offer points, miles or cash back based on a percentage of your spending. This could be spending done in certain categories, like supermarkets, gas, or restaurants. Or it could be a flat rate for all of your everyday purchases. Some cards will let you earn rewards on all your spending, but some have spending caps, which are limits on credit card rewards.
The chance to earn rewards can be a lifesaver for many people – especially if you’re on a budget. Inflation is impacting our everyday spending in so many areas, including at the grocery store and the gas pump. When you maximize credit card rewards, you can put hundreds – even thousands – of dollars back in your wallet.
Credit card companies attract customers by offering incentives, and nothing says incentive like a sign-up bonus (also known as a welcome offer) worth hundreds of dollars.
Sign-up bonuses welcome new cardmembers with generous cash back rewards, points, or airline miles after spending a certain amount within a specific time frame. For example, you might come across an offer to earn $200 after spending $500 within three months of account opening. From paying off existing debt to saving for a much-needed vacation, just think about all the ways you could spend your credit card sign-up bonus.
When comparing credit cards based on sign-up bonuses, you’ll need to make sure the value of the bonus outweighs any costs, like an annual fee. You’ll also want to be certain that you can easily meet the minimum spending requirement within the given timeframe. If you have to spend more than you normally do or make purchases outside your normal spending just to earn a bonus, chances are that bonus isn’t going to be worth the hassle or debt you incur.
For a lot of people, the annual fee will be an important consideration when comparing credit cards. Credit cards that charge an annual fee usually come with enhanced perks you’re unlikely to find with a credit card that doesn’t have an annual fee. But you’ll have to take advantage of these perks to help offset the costs of the annual fee.
To know when a credit card’s annual fee is worth it, you’ll need to compare your spending habits with the perks and benefits that come with a credit card with an annual fee. If you spend $95 a year for a credit card but earn hundreds of dollars in rewards on your normal, everyday spending, the value of the card outweighs the cost of the annual fee. But if you struggle to meet a credit card’s spending requirements to unlock its best perks or you need to make unnecessary purchases just to take advantage of a credit card’s features, you’re probably better off with a credit card with no annual fee.
Intro 0% APR
Credit card APRs are the total annual costs you’ll pay each year for borrowing money. It’s also known as the interest rate. A number of credit cards offer a promotional rate of 0% for a limited time.
These 0% intro APR offers give you a chance to avoid interest charges on the credit card. Depending on the offer, this promotional rate can be used for purchases, to transfer high-interest credit card debt or both. But once the introductory period ends, you’ll be charged a predetermined interest rate on any remaining balance that you owe.
Many intro 0% APR credit cards last more than a year and can run anywhere from 15 to 21 months. If you’re looking for an intro 0% APR offer, make sure it gives you as much time as possible to pay off your balance before the introductory period ends. And if you’re looking to do a balance transfer, pay attention to the balance transfer fee, which could be 3% or 5% of the amount of each balance transfer.
Regular interest rates
If you regularly carry a balance over from month to month, you’ll want to pay close attention to the credit card’s regular APR, which is the interest rate you’ll pay on purchases. Most credit cards have a variable interest rate, such as 10.99% to 21.99%. The better your credit score, the lower the interest rate you’ll pay.
If you have fair or bad credit, it’s a good idea to find ways to improve your credit score. The average credit card interest rate currently sits a bit above 16%, but people with fair or bad credit usually end up paying upwards of 21%.
A good APR for a credit card may not matter, especially if you plan to pay your credit card balance in full each month. But it’s still a good idea to know what you will be charged should you ever need time to pay off your balance.
Additional credit card fees
When comparing credit cards, you’ll have to watch out for more than just annual fees and interest rates. To avoid any unnecessary surprise costs down the road, be on the lookout for the following:
- Late payment fee. If you don’t pay your credit card’s monthly minimum payment on time, you could get stuck with a late fee. These credit card late fees can run as high as $40 depending on how often you’re late with your payments. You may also incur a penalty APR.
- Cash advance APR and fees. Cash advances can get pretty expensive. They typically come with an interest rate that is higher than the rate you’ll pay for purchases. And there is no grace period to pay off the advance; you begin accruing interest the moment you get the cash. Cash advances will also probably come with a fee, which could be a percentage, such as 3%, or a flat fee of $5 or $10.
- Foreign transaction fees. If you like to travel abroad or make online transactions that are processed by an overseas bank, foreign transaction fees typically add an additional 3% to 5% on to each transaction. To avoid this charge, you’ll need to be on the lookout for credit cards with no foreign transaction fees.
- Balance transfer fees. Credit card issuers may charge a 3% or 5% fee to transfer balances over to your new card. Despite the cost, balance transfer fees are often worth paying, especially if you’re moving high-interest credit card debt to a card with an intro 0% APR offer.
Questions to ask yourself when comparing credit cards
- What features and benefits matter most to me?
- Does my credit score match the recommended credit score?
- What are the cardholder perks?
- What fees come with each card?
- What is the APR?
- If there is a sign-up bonus, does it have spending requirements?
Compare credit cards content written by Robert Thorpe.