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Top 5 Factors for Comparing Credit Cards

Feb. 3, 2015
Credit Cards
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With hundreds of credit cards on the market, shopping for one can be overwhelming if you don’t know what to look for. However, you can compare them apples to apples by looking at certain features such as fees, interest rates and rewards.

We’ve outlined the top five factors to consider when you’re comparing credit cards. Some of these criteria will be more important to you than others, depending on your credit card habits.

1. Qualifications

To determine whether you qualify for any credit card, issuers look at your credit score and credit history. Not all credit cards are created equal. Some cards have better terms and offer better rewards than others, and the best cards are reserved for people with excellent credit.

To determine what caliber of credit card you qualify for, it helps to know your FICO score. If you have a score below 630, you will have a hard time getting approved for any card without a cosigner. However, there are credit cards for people with average credit, good credit and, of course, excellent credit.

Below 630 – Bad credit

630-689 – Average credit

690-719 – Good credit

720-850 – Excellent credit

2. Annual fees

Some cards, especially high-rewards cards, charge annual fees. If you’re getting a credit card to establish credit and build credit history, there are plenty of good cash-back credit cards that don’t have annual fees. However, if you’re trying to earn rewards, it could be worth paying the fee to get a higher percent cash-back or more-fruitful rewards.

3. Rewards

Cash back, airline miles and points for hotels, gas and groceries are just some of the rewards you can earn from using a credit card for purchases. The type of rewards card you’ll want depends on your lifestyle. Do you travel often? Do you shop at certain stores frequently? Note patterns in your spending habits and apply for a rewards card that will help you save in that category. For instance, if you love to travel, get a card that helps you accumulate frequent flier miles.

4. Interest rates

A card’s annual percentage rate (APR) determines how much interest you’ll be required to pay on your balance each month. If you plan to always pay off your balance in full, a high APR card won’t hurt you. However, if there’s a chance you’ll accrue a balance, you want a card with the lowest APR possible.

Some cards offer no interest for a limited introductory period, typically six to 18 months. Zero-interest credit cards are a great way to pay down debt without accumulating additional interest. However, be aware of when the introductory period ends and the normal APR kicks in.

5. Other fees

In addition to annual fees, some credit cards charge fees for balance transfers, late payments or foreign transactions. No one likes to pay more than they have to, so look for cards that have no extra costs, especially if you plan to do balance transfers, use your card abroad or frequently miss payments.

MORE>> How to Pick the Best Credit Card for You: 4 Easy Steps

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