For the most part, credit cards serve the same general function: they’re a convenient way to pay for goods and services. With so many credit cards to choose from, how do you know which credit card is right for you?
Generally, there are three key factors that distinguish one credit card from another:
- interest rates
- additional fees and costs
- rewards and benefits.
If you plan to pay your balance in full every month and don’t use the card for cash advances or cash-like transactions, you won’t pay any interest. In this case, the interest rate may not be an important factor in choosing a credit card.
However, if you usually carry a balance on your credit card, you may benefit from switching to a low-interest rate card, even if it has an annual fee. Many regular credit cards, including standard, gold and platinum cards, have low-rate options available. Here is an example comparing low-rate cards to regular-rate cards.
To encourage you to apply for their cards, some credit card issuers will sometimes offer low introductory interest rates on newly issued credit cards and on balance transfers.
Additional fees and costs
Credit cards may have other fees and policies that can increase your costs. For example, if you miss a payment, some credit card issuers may increase the interest rate that you pay. The amount of these fees and charges varies from one credit card to another, and you should consider them carefully when choosing a card.
By law, all federally regulated financial institutions have to include information about fees and charges in their credit card applications. The information must be clearly set out in an information box at either the beginning of the application, or a related document that you receive at the same time. Be sure you understand all of the fees and charges that apply to a credit card before you complete the application.
You can avoid many of these fees and charges by using your credit card wisely. For more detailed information on credit card fees and penalty charges, read the publication Understanding credit card fees.
Rewards and benefits
If you usually pay off your credit card balance every month, then rewards and benefits may make an important difference for you when you choose a credit card. Before you decide, be sure to consider the actual value of the reward program as well as any limitations there might be.
Specialized credit cards
Most people are familiar with general use credit cards, such as “gold,” “platinum” and standard cards. However, there are specialized credit cards available that cater to specific needs.
Comparing credit cards
Try our Credit card selector tool to help you narrow down your choice. The tool allows you to compare the features and costs of over 250 credit cards and find the one that best meets your needs.