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There is no “one best credit card” for everyone, but there can be the best credit card for you and your personal needs. Read on to learn how to compare credit cards side by side and how to decide which one is right for you.
How to compare credit cards side by side
To compare credit cards side by side, you will need to:
- Check in on your credit history
- Know the required credit score for each card
- Decide what type of card you are looking for and why
- Find out the annual fees
- Find out if there is an intro APR and for how long
- Find out the yearly APR
- Learn about all of the credit card reward rates and perks
When comparing credit cards side by side, there are many factors you need to consider before choosing the one that is right for you. Some people prefer cash-back rewards, while others prefer a 0% intro APR rate for 12 months, or luxury travel perks.
Still, you want to be more thorough than those who pick based on the prestige of the credit card issuers (companies like Citibank, American Express, Capital One, Visa, Mastercard, or Bank of America).
Online credit card comparison tools can be helpful when deciding which is the best of the two cards, but if you choose to do some research on your own, you can quickly determine by following a few steps and considerations.
Check your credit history
Before choosing any two or three credit cards to compare, it is essential to check your current credit score. Applying for any credit card out there would be nearly impossible without this information.
With a simple credit score check from a reliable credit bureau such as Experian, Equifax, and/or TransUnion, you can obtain your most up-to-date credit score and provide it in your credit card application.
In most cases, banks and lenders will have their means of collecting your credit information, but for your research and knowledge, it is good to check in on your score before applying so that you do not waste your time and efforts.
Know the required credit score for each card
You want good credit. The higher your current credit score is, the more credit card options you have and the higher the chances of issuer approval and account opening. Credit cards with great reward rates, travel perks (such as low or no foreign transaction fees), and low-interest rates tend to require higher credit scores.
For those who are new to this, in the point system, credit scores can range from 300 to 850. Credit card breakdowns are as follows:
- 300 to 409 = VERY BAD
- 410 to 519 = POOR
- 520 to 629 = FAIR
- 630 to 739 = GOOD
- 740 to 850 = EXCELLENT
Decide what type of card you are looking for and why
After you are familiar with your credit score, you can determine what kinds of cards you are looking for. This also considers your general purpose for opening a credit card.
In general, there are three types of credit cards:
- Credit cards that will accrue rewards as you make purchases
- Credit cards that will save you money on interest
- Credit cards that help you build or rebuild credit
The type of credit card you are looking for should fall into one of these categories based on your specific needs.
Find out the annual fees
You must also consider a credit card’s annual fee depending on which card you choose. Generally, a card with many rewards will usually have a yearly fee. Something to consider is how the annual fee will offset your annual bonuses. That is the best way to decide if choosing a card with a yearly fee is worth it.
For example, a credit card with an annual fee of between $95 to $600 will vary tremendously in travel rewards points as opposed to a credit card with a yearly fee of $0. In most cases, a credit card used to consolidate small amounts of debt will have a $0 annual fee because it is used solely for paying off debt at 12-15 months on 0% interest instead of being used for travel purposes.
Knowing exactly what type of card you are looking for and WHY you want that card will heavily affect if the card you choose has an annual fee.
Those who do not want to worry about an annual fee each year have many options; just know that you may not have the best reward rate system and vice versa.
Find out if there is an intro APR and for how long
The APR of a credit card is the annual percentage interest rate that you pay on top of your balance if you do not make payments in full each month. An intro APR is an APR that lasts for a certain period and then changes after that.
Many people choose credit cards with 0% intro APR if they have a big purchase or small purchases to make but cannot repay it by the next month.
It is vital to check out the fine print of promotional rates because they can vary. Make sure to look for:
- How long is the 0% APR promotional period? A 0% intro APR can range between 6-24 months on average. Usually, more extended promotional periods are granted for those with higher credit scores.
- What does the intro APR apply to? Sometimes, a 0% APR can only be used for certain things. Make sure to check what is covered during this time. In most cases, this can cover purchases made within that time frame or balance transfers.
- What is the credit card balance transfer policy? This usually comes with a fee if you want to make balance transfers. Each issuer has its terms for balance transfers. Some credit card companies limit the number of balance transfers that can be made on 0% interest per month or year. Determining what types of debt can be transferred and how much is crucial.
It is also important to note that not all credit cards offer a 0% intro APR rate. So if this is something you are looking for, make sure to find out if the card you want provides this.
Find Out the Yearly APR
As previously mentioned, APR is the annual percentage interest rate on credit cards and loans. APR should be heavily considered when comparing credit cards if you think you may not be paying off monthly balances on time.
If you expect to carry over balances into the next month, the lower the APR, the better. Typical APR ranges from 14.99% to 22.99%. Cards with lower APR are usually approved for those with excellent credit scores, though they can be difficult to get for those with bad credit.
You may see the word “variable,” meaning that APR can go up and down when the prime rate does. You may also see the word “penalty,” which refers to APR on late payments. This can also fluctuate between credit card companies.
In some cases, APR may not even apply to some credit cards as they require each payment to be made in full at the balance due date of every month.
Learn about all the credit card reward rates and perks
Rewards rewards rewards. Reward rates are among the most significant reasons for choosing a specific rewards credit card. There are many types of bonuses depending on each credit card. This is what to consider:
- Base rewards rates: This means that rewards can vary. Some cards earn a flat cashback rewards rate on every purchase, usually ranging from 1% to 2% of the purchase price. Some have a “low base rate” like 1% on every purchase but offer a higher rate (1.5% to 5%) on specific purchase categories.
- Bonus categories: Bonus categories mean that you can earn higher rewards rates on categories such as gas stations, restaurants, supermarkets, or travel, and in most cases, the bonus is triggered where you make the purchases.
- Bonus rewards rates: Bonus rewards rates mean you earn more than 1% cash back on a purchase. Usually, bonus rewards would be at a higher rate like 2%+ cash back or as a multiplier like 2x or 3x for point rewards which can then be redeemed.
- Travel perks: Cashback and rewards points aren’t the only types of rewards out there. In most cases, travel credit cards offer higher rewards points on travel purchases, but these travel perks can also include airline/ airport lounge access. Travel credit cards are great, especially for those who fully utilize these perks.
Knowing all the rewards that come with your credit card is essential to maximize and leverage each benefit.
Whether you are looking for a personal or business credit card, there are a lot of different factors to consider to get the most out of your card. Knowing your credit score ahead of time will give you an idea of which cards you will qualify for and which one might be the right card for you.
Getting clear on your wants and needs will heavily factor into your credit card choice, and all of the rewards and bonus features will be a plus. Check out our website if you want more information about credit cards or anything business.
Information provided on Entrepreneur Guide is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, we do not recommend or advise individuals to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results