7 Factors to Consider When Comparing Credit Cards

If you ever seriously try to compare credit cards, you might notice how much it’s like navigating the cereal aisle at the grocery store. The abundance of possibilities is alluring, but if you really try to make an informed, analytical choice, you could become a victim of “analysis paralysis.”

It doesn’t have to be that way. To help make your credit card comparison a little bit easier, here are seven key factors to consider.

Before you start comparing credit cards, it’s best to understand your own financial profile. Your credit score and credit history play a big role in what type of credit card you qualify for. Having good to excellent credit can help you to qualify for the most generous rewards cards, though there are plenty of cards available for those simply looking to establish or build credit history, too.    

It also helps to know your spending habits. Remember that a credit card isn’t a source of free money – you have to pay back every purchase, and any unpaid monthly balance will likely start to collect interest.

Whether you’re getting your first card or searching for a new one that best fits your current lifestyle, ask yourself why you want a credit card. Your answer will be the basis for determining which credit cards to compare and, ultimately, which one to choose. Here are a few reasons you might want a credit card and some matching card types:  

• If you’re an avid traveler, If you’re an avid traveler, look into cards that offer hotel, airline, or general travel rewards. 
• If you’re a small business owner, a cash back business credit card can help you pay for company expenses.
• If you’re just starting to build credit, consider a card with no annual fees.
• If you want to make a balance transfer, compare credit cards that allow balance transfers.

If you compare rewards points or cash back credit cards, you’ll usually find low or no annual fee credit cards typically offer fewer rewards and benefits when compared with their annual fee counterparts. However, this will vary depending on the card in question.

When comparing annual fees, it’s a good idea to ensure that the card’s rewards and benefits will make the fee worthwhile for you. If you’re an avid traveler with an airline card that gets you free checked bags, free airport lounge access, and priority boarding, the higher fee might be well worth it. But if you’re not going to use the card often or accrue rewards, take some time to consider whether the annual fee is worth the cost.

Credit cards can have a variety of different interest rates, also known as Annual Percentage Rates (APRs). APRs for purchases, balance transfers, and cash advances, for example, typically vary. When comparing different credit cards’ purchase APR, consider whether you plan to pay off your statement balance in full every month. If you’re able to pay the balance off, you can save on interest. However, if you end up making the minimum payment, you’ll pay more in interest if you have a card with a higher purchase APR.

If you think there’s a chance you might carry a revolving balance over time, making only the minimum monthly payment, then you’ll want the card with the lowest APR available – even generous rewards typically won’t compensate for the interest accrued over time. If you’re planning to make a large purchase and would like to pay it off over time, consider comparing 0% introductory APR credit cards.

Along with APRs and annual fees, other common credit fees include balance transfers, cash advances, foreign transactions, late payments, returned payments, and others. Whether you’ll have extra fees depends on how you use your credit card. For example, if you don’t plan to use cash advances or make any balance transfers, you could consider a card that charges extra for those services. Or, if you plan to do a lot of international traveling, a no foreign transaction fee credit card might be the way to go.

Some credit cards offer additional benefits like certain types of rental car insurance, airport lounge access, and roadside assistance, to name a few. But cards that offer these additional benefits will typically charge an annual fee.

When comparing a credit card’s extra benefits, consider your needs. Free airport lounge access might sound tempting, but it might not be worth the potential annual fee unless you spend a lot of time in airports.

After you compare credit cards and identify a card that’s a good fit for your needs, you may want to consider submitting your application. Before you do, there are a few things that you’ll typically want to keep in mind:

• Check your credit score first: Most credit card companies have a list of requirements that you’ll need to meet. Knowing your credit score will help you see where you stand before applying.
• Consider a soft inquiry: Before applying, consider opting for a credit card that offers an initial soft inquiry. A soft inquiry doesn’t impact your credit score. It can, however, inform you whether you meet some or all of the approval criteria (depending on the card issuer) before you proceed with formal application. Keep in mind that a hard inquiry may occur once you accept the card.
• Avoid applying for multiple credit cards at the same time: Credit card applications will typically appear on your credit report. Applying for too many credit cards at once could negatively impact your credit and may be a red flag for potential lenders.¹