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If you're going to compare credit cards, you'd better do it right. The process can be overwhelming and a mistake can cost you hundreds (if not thousands) of dollars. Want to know how to do an apples to apples comparison, leaving no margin for error? Here are the things you need to look for.
Intro APR vs. Fixed APR
First of all, don't take an APR at face value. Sure, you can apply for that 4.99% credit card offer, throwing the 7.99% offer into the shredder, but what if that 4.99% rate is just a teaser? What if it jumps up to 14.99% after a few months? That 7.99% fixed rate sure would have been better.
Before you apply for any credit card, make sure you know the details of the APR. Is it fixed? Is it an intro or "teaser" rate? If it is, what's it going to jump to when the introductory period is over (and how long with that be)?
A Nickel Here, A Dollar There
Let's compare credit cards A and B in this scenario. Card A has an APR of 7.25% and it's a fixed rate. Card B is 9.9% and it's also fixed. Which card do you choose? If you picked card A, slap yourself on the hand.
Sure, card A might have a lower interest rate but what if the annual fee is $59 and there's a minimum monthly finance charge of $5? On the other hand, card B has no annual fee and no minimum monthly charge. Card B would be the better choice.
A low APR is great, but not if it means high fees. When considering the cost of a credit card you need to consider ALL of the costs, not just the APR. Is there an annual fee? If so, how much is it? Are there minimum monthly finance charges?
What About Grace?
Always compare the grace periods when you try to compare credit cards. A credit card that offers a grace period of 25 days is always better than one with no grace period at all. Credit cards that don't offer grace periods begin charging interest from the day of your purchase. That money can add up over the years and it's money out the window.
Remember, on the surface two credit cards can seem similar or one can seem way better than the other. It takes digging a little deeper to really see which credit card is better for you. The next time you compare credit cards make sure you take all the above factors into consideration before making your choice.
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