What is the best way to compare credit cards?

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  | Published: 02 December 2020 | Last Updated On: 23 December 2020

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Credit cards make our lives easy and convenient. One no longer needs to carry wads of cash around as a single card resolves all your money problems. Your wallet gets thinner but your finances get sorted.

There are so many options to choose from when it comes to the credit cards available. Many banks and financial institutions offer exciting rewards to attract the customers. This makes it extremely difficult to decide which is the best among the many alternatives available. Comparing credit cards can be quite bewildering if you are trying to get your first ever credit card. But it is sometimes equally difficult for the pros to decide.

To compare credit cards, the first and foremost thing is to discern what features are most important for you based on your needs and requirements. The next thing is to understand well what a good offer means based on your personal needs. It is very important to realize that there isn’t one card that is “the best credit card” since the title of the best credit card is subjective. A card that fulfils all your requirements might fall short in fulfilling someone else’s needs and vice versa. Someone might prefer a credit card that offers tremendous amounts of cash back and comes with no annual fees while another person might want a card that offers frequent flyer miles along with other travel related benefits. That being said, it is however possible to find the card that is perfect for you.

Therefore, it is important to evaluate and compare credit cards side by side keeping in mind the advantages you want your card to offer. One can put the different travellers’ favourite credit cards against each other to arrive at the one that is most suited to you. Another way to do this by picking a bank or a credit card company and going through all their cards to choose your favourite. You can make a list of the cashback cards with a minimum salary requirement of AED 5000 to pick the card that offers the most rewards and advantages.

Other than this, here is a list of a few key factors you should keep in mind while you compare credit cards to narrow down your options and pick the one that appeals to you the most:

The credit score: Before you begin to compare credit cards on the basis of the its features, you need to find out the credit scores that are recommended by the credit card companies since evaluating the features will happen only once your application is approved on the basis of your credit score. Comparing cards by first finding out the recommended credit scores will also help ascertain whether your application will be approved or not.

If you have a high credit score, you are most likely to get approval from most credit cards providers. A high score will also enable you to get many lucrative offers, a lower rate of interest possibly and many other perks. If, however your credit score isn’t that great, you should look for secured credit cards.

Credit scores are often represented as numbers ranging from 300 to 850. Here are is a general breakdown of credit scores:

  • 720 and above: Excellent credit
  • 690- 719: Good credit
  • 630- 689: Average or Fair credit
  • 629 and below: Bad or Poor credit

The type of card: There are many different variations of credit cards available, but one must primarily decide the category of the cards they want. Credit cards can largely be divided into three major types that you should keep in mind when you compare credit cards. The three categories are:

  • Premium Cards: These are further divided into Gold, Platinum or Titanium cards. These cards offer the premium benefits like a higher credit limit and come with a bunch of extra features like emergency services or travel insurance to name a few.
  • Secured Cards: These cards need the card holder to make a security deposit and are essentially for those individuals who have no credit or a bad credit score. This is a way for the lenders to insure themselves against any possible risks.
  • Regular Cards: Unlike the security cards, these cards do not require the cardholder to make a security deposit. They have some extra features compared to the secured cards like a higher credit limit but this credit limit is usually a lot less than that offered by the premium cards.

The bonus offer: A bonus offer for credit cards can also be known as a sign-up bonus, new cardholder offer or a welcome offer. Regardless of what it is called, it is a promotional offer meant to tempt the customers to buy the credit cards. Usually these include airmiles, points, cashback or exclusive discounts offered to the credit cardholder for signing-up or during the first few months of owning the card.

When you have to compare credit cards that provide very similar benefits, checking the bonus offer can help you make your decision. Here’s a few things to keep in mind:

  • The required spending: Can you meet the required minimum spending amount in the given time frame?
  • The bonus value: Make sure to check the currency of the rewards being offered to you.

The offer of a bonus is certainly something worth considering but it is important to know that sometimes cards that don’t provide rewards can also be worthwhile since they make up for the lack of rewards in the long run. Afterall not everything that glitters is gold!

The annual fee: This is one of the most important aspect when you sit down to compare credit cards. If a credit card charges a high annual fee, it offsets the offers and rewards it claims to provide. While comparing cards you will notice however that cards that charge an annual fee are likely to offer better rewards than those that operate without any annual fees. Thus, making annual fee an important factor to evaluate when doing a comparison of credit cards.

So how does one decide whether the annual fee they are charged is actually worth it? The answer is simple. The card’s value for you must outweigh the charges of this fee. The perks offered by the card should be able to make up for the annual fee charged, even when it is relatively high. 

For someone who wants to build or rebuild their credit, annual fee will most likely unlock features that were otherwise inaccessible to you.

Other fees: When you have to compare credit cards, it is vital to go through the fine print to discern all the extra charges or fees applicable on your card so as to make an informed choice. Some of the charges could be the late payment fees, annual fees, balance transfer fees, foreign transaction fees or over the limit fees among many others.

The grace period: Another thing to consider is the grace period which is the number of days one has in order to pay the bill without incurring a finance charge. Try to go for a card with a higher grace period keeping in mind the worst-case scenarios.

Incentives and rewards: Credit cards offer so many kinds of rewards like frequent flyer miles, car rental insurance, valet parking, online account access, travel booking discounts, additional warranty cover, cash rebates on certain purchases to name a few. These incentives make using a credit card even more advantageous and are therefore an important point to consider when you compare credit cards.

If in case you have a bad credit or no credit at all, there will be some time before you are able to build a good credit and get approved for a credit card that provides incentives and rewards.

The interest rate: The interest rates that are applicable on credit cards are either fixed or variable. The variable interest rates have their APR attached to an index, which is usually called the prime rate. The variable interest rate will vary as the short-term rates undergo changes in the macroeconomy.

A lot of people feel that this changing interest rate is risky and thus prefer a fixed rate of interest. They feel as if they have avoided the interest rate risks. Although the good thing is the tone can switch to either rates by requesting their credit card provider.

People who find it hard to repay their credit card bill in time each month or people who carry balance on their credit cards should ideally go for a low interest card. If however you are someone who is disciplined in paying their bills on time, a low interest card is not as important as a card that has a longer grace period or no annual fee charges.

Introductory APR: A lot of credit cards start with a 0% interest rate or maybe a lower rate of interest for the initial few months after getting a credit card. This is a good deal for saving money and should be taken into consideration as you compare credit cards. 

Here are some of the things to keep an eye out for:

  • What is the duration of the 0% interest?
  • What does this 0% APR apply to? Getting A 0% APR on balance transfers as well as purchases is better than a promotional rate on either one of them.
  • Keep in mind the card’s balance transfer policy, the fee applied to it, the types of debts that are transferrable and the limit imposed on it.

The introductory APR for the first few months is great if you want to make some large purchases. It will be much easier to pay them off in the period when the introductory APR is active.

In a Nutshell

Keep these points in mind the next time you have to compare credit cards. While determining which is the best credit card for you it is important to remember that each card is unique and has unique benefits to them. Therefore, carefully scrutinize all the options available to you before you make your final decision.