What Should You look for when Choosing a Credit Card?

Been asking yourself “What should you look for when choosing a credit card?”

Overwhelmed by all of the choices?

Well I got your back!

Read through this post to find out exactly what to look for and how to compare credit card offers.

By considering factors such as annual fees, interest rates, rewards, and more, you can easily narrow down your options and find the perfect card for you.

Just remember don’t apply for too many credit cards in a short amount of time….you don’t want to lower your credit score!

1. Interest rate/APR

The first thing I say to look for when teaching how to compare credit card offers is the APR and Interest rates.

Credit card APR (annual percentage rate) and interest rates are two closely related terms linked to borrowing money.

They both refer to the cost of borrowing money, however they work in different ways.

APR is an annualized rate that reflects the total cost of borrowing for a year, including all fees and interest associated with the loan.

It’s usually expressed as a percentage, and serves as the benchmark for borrowing money.

Interest rates are a type of fee that is charged on top of the principal borrowed amount.

The rate will vary depending on factors such as your credit score and economic conditions.

This rate will be applied to any balance carried forward from month to month.

Should I look at Interest rate or APR when comparing credit cards?

The best way to compare credit cards is to look at the APR.

Interest rates are important, but it’s the APR that truly reflects your total cost for borrowing money over a year.

An APR will help you determine which card offers you the lowest overall cost of borrowing and can save you money in the long run.

Understanding all the associated costs of a credit card can help you make an informed decision when it comes to choosing the right card for you.

2. Fees: Look out for fees such as annual fees, transaction fees, late payment fees, and balance transfer fees and cash advance fees

Another vey important thing you should look for when choosing a credit card is fees.

There are additional fees beyond the Interest Rate and APR that you will want to take a look at when comparing credit card offers.

Depending on the type of card you have, these can include annual fees, balance transfer fees, cash advance fees and late payment penalties to name a few.

Make sure to take all of these into account when comparing different credit card terms.

It’s important to understand what you’re paying for, and how much it will cost in the long run.

Some fees such as annual fees are usually a set amount that is taken out every year for the use of a credit card.

While other fees such as late payment and balance transfer fees depend on your activity.

The reason you are applying for this new credit card can also help to determine how to compare the credit card terms.

Annual fees

Are charged each year for owning a particular credit card and are usually based on your creditworthiness and the type of card. .

It is important to understand if there are any additional charges or hidden fees for the services offered.

Transaction fees

Are charged every time you use your card to make a purchase or withdraw cash from an ATM.

Late payment fees

Are charged when you don’t make a minimum payment on your credit card balance by the due date.

Balance transfer fees

Are charged when you move debt from one credit card to another.

Some may offer low to 0% APR on Balance Transfer fees for a given amount of time (ex. 12 months).

So this can be a huge plus if you are trying to pay down debt and are incurring large interest fees on a different card.

Cash advance fees

Are charged when you use your card to withdraw cash from an ATM machine or other physical location.

I do not recommend ever taken out cash advances from your credit cards as the fees and interest rates re typically so high that it is so not worth it.

3. Rewards: Compare rewards programs offered by each credit card to find which one works best for you.

Reward programs can be a fun thing you should look for when choosing a credit card.

Credit cards offer a variety of rewards, depending on the type of card you have.

Some reward programs offer points for every dollar spent, cash back bonuses and even airline miles.

You’ll want to look at how long it would take to receive a reward as well as if the points or rewards expire.

Points Rewards:

Points-based credit cards are popular with many customers as they often offer great value.

Most point systems come with different tiers of rewards, allowing customers to earn more points for purchases in certain categories like gas or groceries.

Accumulated points can be redeemed for cash back, flights, gift cards and other merchandise.

Cash Back Rewards:

Cash back credit cards offer a percentage of your purchase back as a statement credit or direct deposit into your account.

These rewards usually range from 1-5%.

Airline Miles Rewards:

Airline miles are a great way to save money when traveling.

These cards usually offer bonus points for purchases as well as airline-specific discounts and rewards.

These are just a few of the types of rewards you can find on credit cards, so make sure to look for these when comparing credit card offers as it can save you money as well!

4. Credit limit

Another thing to look at when learning how to compare credit card terms is the credit limit.

Credit limit is the maximum amount of credit that a cardholder can use.

This means you cannot spend any more than the set credit limit on your card.

Your credit limit will usually depend on your income and credit score. And some will list a range, some will not, depending on the credit card company.

Your credit limit will be determined once you apply and are approved, so you will not know your definitive credit card limit until after you choose a card to apply for.

It’s important to remember to stay within your credit limit if you want to avoid fees and harm your credit score.

You should also be aware that the higher your credit limit, the more it can affect your credit utilization ratio which is an important factor for maintaining a good FICO score.

If you find yourself close to reaching or exceeding your credit limit, you may need to consider paying off some of your balance so you don’t go over.

5. Payment flexibility options / grace period for payments

What are common payment flexibility options on a credit card?

Payment flexibility is an option available on some credit cards that allows cardholders to make payments at different times throughout the billing cycle.

This helps them to manage their finances more easily and avoid late fees or penalties.

Common payment flexibility options include:

• Minimum Payment Option –

This lets you pay only the minimum amount due on your balance each month.

• Due Date Extension –

This lets you change the payment due date to a later one.

• Deferred Payment Plan –

This lets you move part or all of your remaining balance to a future billing cycle and make payments over time.

• Pay Ahead Option –

This lets you pay more than the minimum balance due each month.

• Grace Period for Payments –

This allows you to pay your balance in full within a certain period of time without incurring interest charges.

These options are great for cardholders who might need extra time to manage their finances or who want to maintain a good credit score by avoiding late fees and penalties.

They can also be great when coming up with a debt repayment strategy.

Ambitious Thoughts

I hope this post was helpful in showing you what should you look for when choosing a credit card.

And yes…

There are many factors to consider when comparing credit card offers.

I believe APR and interest is one of the most important things to consider when comparing credit card terms.

Fees follow APR in importance for me.

If the cards are similar in this aspect, move to the next most important thing to you.

Points-based rewards and cash back offers offer great value.

While credit limit and payment flexibility options provide the convenience of managing your finances better.

You will want to look at all of these things as a whole to help you make an informed decision about which card is best for you.

Let me know in the comments if this post was helpful for you?? And if there is any other topics you might need help with!

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