Factors to Compare Credit Cards

1. Understand your financial profile and spending habits

Before you even start researching and comparing credit cards, you must first understand:

Your financial profile: This includes your credit score and history, both of which play a big role in what type of credit card you can qualify for. For example, higher-end credit cards typically are only available to those with excellent credit; however, there are options for those looking to establish or build credit. Knowing what you qualify for can ensure you’re comparing realistic options.

Your spending habits: This is two-fold. First, keep in mind that a credit card isn’t free money and you’ll have to pay back what you spend on purchases. Unpaid monthly balances collect interest and can quickly lead to credit card debt, so having an idea of how much you’ll put on your card each month (and having a plan to pay it off) is key.

Second, most credit cards offer rewards (like cash back, points, or miles) when you make purchases, and some have higher reward rates for certain categories of spending. Know whether you spend more on groceries, gas, subscriptions, dining, travel, etc. so you can find a card with rewards that align with where you already spend.

2. Ask yourself why you want a credit card

Is this your first credit card? Are you an avid traveler and looking for travel savings? A small business owner? Are you looking to make a balance transfer? Do you want another card with different rewards so you can earn more with your spending?

Determining why you want a credit card can help you compare and choose the right one for your needs. For example, if you’re a frequent flyer, you’ll want to choose one that offers airline, hotel, or general travel rewards. Or if you want to make a balance transfer, look for one with a 0% balance transfer or no fees.

3. Compare credit card rewards

Because one of the biggest benefits of having a credit card is the rewards you can earn on purchases, it’s important to choose a card with rewards that align with your spending and needs.

For example, cards may offer a percentage of your spending back as cash, a statement credit, a gift card, or other options. Some offer a flat rate, like 1% or 2%, on all purchases, while others have categories where you can earn higher rewards rates, up to 5% or more on certain purchases. Others may offer points or miles that can be redeemed for free flights or hotel stays or other-travel related discounts.

Go back to your spending habits. If you don’t travel much, choosing a card that offers airline miles likely isn’t a good option. Alternatively, if you are a frequent flyer, you may want a co-branded card with your favorite airline.

4. Compare annual fees, additional fees, and penalties

Some credit cards have a $0 annual fee while other “elite” cards can be upwards of $450 or more per year. Typically the better and more lucrative the rewards, the higher the annual fee. But, there are plenty of rewards cards to choose from that won’t cost you anything.

If you do choose a card with an annual fee, make sure the rewards and other benefits balance the fee and make it worthwhile.

Other fees may include:

• Balance transfer fees
• Cash advance fees
• Foreign transaction fees
• Late fees
• Returned payment fees
• And more

While you may not ever encounter some of these, it’s important to know what they are. And, you can take into consideration some cards based on their fees. For example, if you don’t plan on using it for a balance transfer or cash advance, it doesn’t matter what those fees are. Or, if you travel frequently, no foreign transaction fees may be important.

5. Compare interest rates

Credit cards can have interest rates (annual percentage rate, or APR) for purchases, balance transfers, and cash advances, and typically, they are all different. If you pay off your balance in full each month and don’t make a balance transfer or cash advance, you don’t have to worry as much about APR. In this case, it may be ok to consider a card with a higher APR.

However, if you think you may ever carry a balance, you’ll want to choose a card with the lowest APR possible.

Or, if you are making a large purchase and want to pay it off over time without accruing interest, consider a 0% introductory APR balance transfer credit card.

You should also understand if the card offers a grace period, which is the period between the end of a billing cycle and the date your payment is due. Cards with a grace period won’t charge interest on a balance during that time as long as you pay your balance in full by the due date.

Related: What is APR on Credit Card and How Does it Work?

6. Compare extra benefits

In addition to rewards on spending, most credit cards offer additional benefits such as:

• Travel Insurance
• Rental car insurance
• Roadside assistance
• Airport lounge access
• Extended warranty protection
• Free checked bags
• TSA PreCheck
• Complimentary subscriptions such as to DoorDash or Instacart

While cards with several extra benefits often have higher annual fees, consider your needs when it comes to comparing extra benefits. For example, if they are benefits you won’t use, paying a higher annual fee for them may not make sense. Or, some of these benefits may be important to you so you’ll want to choose a card that offers them.

7. Compare welcome offers

Credit card companies want your business, which is why most have some kind of welcome offer for new cardholders. These offers are typically a certain amount of cash back, points, or miles if you spend a certain amount of money in a designated period. For example, you may earn an extra $250 if you spend $3,000 in the first four months of opening the card. Or, 50,000 miles if you spend $2,500 in the first three months.

Welcome offers can be attractive, but make sure they are reasonable. For example, if your regular spending doesn’t align with $3,000 in four months, don’t choose that card based on the welcome offer alone.

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