Ask the Readers: What’s the Best Way to Compare Credit Cards?
Published on - February 15th, 2008 (Modified on - July 11th, 2012) (by J.D. Roth) In October, Michael wrote with a question about credit cards. Because I try to discourage credit card use, I haven’t posted it. But my attitude is beginning to soften. Michael’s question now seems perfectly reasonable, and I suspect other readers have similar concerns. He writes:
I have a credit card account which I got with Wells Fargo when I started college. I’d like to switch over to a card with some sort of bonus (miles, or cash back or something), which means I’m now credit card shopping. As I’ve tried to look for the best credit card for my needs, I’ve run into some difficulties:
- There are TONS of junk pages out there making it hard to find good objective comparison sites.
- Info pages on the cards only list the initial APR (which is usually super low, like 0% for 12 months.)
I may actually keep the current credit card open since I’ve had it for almost six years and have been very responsible with it. I’ve paid it off completely every month, except for maybe two or three times, but always paid it off completely the following month.
I can’t recall having seen an article like this on your site. How can I choose a credit card?
Michael’s right: I don’t talk much about credit cards at Get Rich Slowly. For years, I blamed them for leading me into debt. But my attitude toward credit use has changed — I’ve come to recognize that they can be valuable tools if used responsibly. (My card is a key component in my paperless personal finance system.)
If you have problems with credit, do not open new accounts. However, if you’re a responsible card-holder like Michael, then it can pay to shop around. You can compare credit cards at CardRatings.com or even right here at Get Rich Slowly. Also read about credit card basics and how to choose a credit card.
If I were shopping for a card, I wouldn’t even consider the APR. If you don’t intend to carry a balance, this number is irrelevant. I’d focus instead on other factors: annual fee, rewards, special features. (Before our trip to Europe, I obtained a card that waived certain fees overseas, for example.)
Whichever card Michael chooses, he should read the terms and conditions carefully before activating it. When I received my new card last July, I spent two hours reading all of the documentation and fine print. I called the credit card company to ask questions. (That step didn’t really help, by the way, but I did it.) Ultimately, I still missed an important rule, but I did my best to understand the card before I began using it. If I had found any problems, I would never have activated the account.
Finally, Michael should not close his existing credit card account, even if he opens a new one. Keeping old credit card accounts open gives your credit score a boost. He should check his credit report every few months, though, to be sure there’s no suspicious activity on the old account.
Here are some past Get Rich Slowly articles about smart credit card use:
- How those evil credit cards can be good for you
- Why I applied for a credit card (and why it’s not the end of the world)
- The only credit card guide you’ll ever need
What advice can you offer Michael? What’s the best way to compare credit cards? How do you find a good one? Where’s the best place to research options? (Also, would you like to see more posts at Get Rich Slowly about smart credit card use? Or would you prefer the subject remained limited?)
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This article is about Ask the Readers, Choices, Credit Cards
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I closed all my credit cards in 2007, as part of my debt paydown project, and my FICO score remained above 800. I closed my accounts because I was fed up with both BOA and Citi and did not want to remain as a customer. I also didn’t want to worry about fraud on old dormant accounts.
I’ve since opened a new credit card that I only use for business travel. I went with Capital One design your own card, you get to pick the features that are most important to you, I earn 2 miles for each dollar spent.
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For those in Canada, http://www.moneytools.ca is a website run by the Financial Consumer Agency of Canada, a government agency.
They have “The Credit Card Interactive Tool”, that gives details of the 200 or so credit cards available in Canada, and gives you the information you need to help you find the one that is best for you.
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Credit cards can help you Get Rich Slowly or help you get in debt quickly. I have four credit cards and each one offers a different benefit. Amex and Discover offer 3% cash back. I also have a Visa with air travel rewards where I just got a round trip ticket for a $5 handling fee. On my ChaseRewards card I got a check sent to me for $250 as I had accrued enough points. It may take a few months or a few years for someone to get enough points to get a check or a free airline ticket. If you paid for things in cash you are actually paying 3% or more for things as you will not get that back in rewards redemption. However, the rewards is what credit card companies use to get people signed up for thier cards in hopes that you will not pay off your card each month.
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BankRate is a great site for starting research.
Since I don’t carry a balance on my credit cards, I have been shopping for a better “rewards” card too. I did get a “No Hassle Miles” card from Cap-1, which is nice so far ($1=1.25mi and a clean web interface), but since I do not have a large income, the gain in miles is slowww (FL to MI is 40k mi, or roughly $32k spent on a $20k student salary).
So now I am looking towards a cash-back card, since I’ve seen a few that would return better for me than my miles card. Best of luck to you!
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In addition to the Bankrate website mentioned above, you can look at very objective ratings/rankings of the service side of different major credit cards at Keynote (see https://scorecards.keynote.com/scorecards.aspx). No need to subscribe there as the full report is too much info; just go with the rankings. There are other useful rankings on that site too.
Unless you’re a business traveler or will have super high levels of personal travel, ONLY consider cards with no annual fees.
Considering all the different points/rewards options is a mess. Basically, the best programs (IMHO) are the straightforward ones that offer pure cash back in the form of a check mailed to you (Chase is one example). The best you can do at that level is 1-2% average of all your purchases. Some “loyalty” cards offer higher percentages when you buy from them, which may suit you, but I personally don’t like feeling restricted.
On the cards that only give points for “stuff” (whether miles or goods), the cash value of the items you get for points were you to just go out and buy the item retail is often less than the 1-2% you’d get if you just had a cash back program. This is especially true if you employ some of the basic frugal scrutiny and bargain hunting advocated on this site.
Anyhow, basic rules according to me:
1. Credit card use is only allowed when the balance will be paid off IN FULL every month.
2. Only go with credit card with NO annual fees, unless you are a big-time traveler.
3. The simplest cash-back programs are best, even if the percentage point rewards are lower than other loyalty cards.
My two cents…
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Free Money Finance did a really good post about the best cash-back cards.
http://www.freemoneyfinance.com/2007/09/how-you-can-ear.html
It seems using a combination of the AMEX card and the Chase Freedom card will get you the best return. Personally, to keep life simple, I use just one: the Chase Freedom card. You get an actual check in the mail instead of “points” or “miles”. Also, if you save up $200 of cash back, you get a check for $250! I love that card
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Becky’s response seems really good.
But, I think there’s no silver bullet as everyone’s situation is different.
We use a Chase “Borders” rewards card. We get the 3% on some purchases, 1% on some purchases for rewards points. We can cash in 4500 points for a $50 Borders gift card. That’s better than 1 to 1 for dollars to points, so better than 1%.
Then, my wife works at a Borders book store where we get 33% off most products. (not DVDs, can’t have everything.)
Last year we had 6 or 7 $50 Borders cards. 33% discount on all products. We basically bought Christmas for parents, brothers/sisters, aunts/uncles for everyone with these cards.
And we love to read and own books, so it’s perfect for us.
Obviously this is unique, but so is everyone’s situation. Sometimes you have to do the footwork to find something perfect for you.
And as always, I’ll reiterate what everyone else says — Never, EVER, carry a balance.
Brian
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You may want to check with the credit card company you currently have. Sometimes you just need to ask.
I have a Wells credit card that we use for all of our regular monthly expenses and bills just because of their rewards program. (Of course we pay off the balance every month, automatically!!)
Every dollar charged earns a point, and then 1,000 points equals $10 in gift cards/cash that you can redeem at any time. It’s one of the best programs I’ve seen out there and they have a great selection. That’s something to think about too. I have a card with Discover and I was not impressed with their selection of gift cards.
Wells offers a great selection of big box gift cards along with the option to have the cash reward loaded on a Visa gift card that you could use anywhere.
We earn the equivalent of $15-20 a month in gift cards that we then redeem later to either Christmas shop or make improvements to our house.
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My first bit of advice would be the same as everyone else’s so far, “Never carry a balance!”
However, as another alternative to the cards mentioned already, I’d suggest the Amazon Chase Visa card. But ONLY if you do a lot of shopping through Amazon, of course. You get 3% cash back on your Amazon purchases and 1% cash back on all other purchases, given to you in $25 increments. Since I’m constantly ordering supplies and other stuff from Amazon anyway, it makes the most sense for me to use their card. So far, I’m averaging one $25 cash back coupon every month.
And here’s a little helpful note, if you order a lot of items use the Amazon card to get Amazon Prime ($79/year) and get free 2-day shipping no matter the order size and the $79 gets the 3% bonus. And don’t forget Amazon’s warehouse website (WarehouseDeals.com) where you can save more cash and still get the 3% bonus!
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Here is the utltimate credit card guide. I was looking at the Wamu card, but their site didnt go into the details of the benefits.
http://www.fatwallet.com/forums/finance/711457/
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May I recommend the Fatwallet Finance Forum thread “What Credit Card Should I Get ? FAQ” (http://www.fatwallet.com/forums/finance/711457/). There is a great roundup of cards there from people who really do read fine print! I went with the Pentagon Federal Cash Rewards card, which gives 5% on gas, 2% on groceries, and 1.25% on everything else. Cash back is paid monthly, not yearly like most of the other cards, and while their website is lacking, their customer service is some of the best in the industry.
By the way, Consumer Reports lists USAA as the highest rated issuer, AMEX and Discover as the highest rated cards, and credit unions in general as higher rated.
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I have the Amazon Chase card and I like it. It was my primary credit card for a long time, and I tend to order from Amazon frequently so getting rewards that spend there was nice.
The best part of the card in my opinion however is the automatic “pay my balance on the due date” feature. I don’t have to do anything to have my account paid out of my linked checking account; I can never forget a bill and incur a finance charge. I always check my statement carefully of course to make sure the charges are correct, but that’s all I have to do.
This became even more useful when I switched to a Capital One Visa card that rewards 1.25% back. It became easier to forget to schedule my Chase payment since I don’t use the card for much, and I forgot once.
I have the Capital One card set to apply my rewards to my account balance every time they accrue to $25, so there’s no fuss. I pay through the online system via link to my checking account, so no stamps or envelopes or checks.
To me, the most important features of a credit card are 1) rewards, and 2) electronic payment features. For me it’s all about that convenience.
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I just recommend getting a Penfed Cash Rewards Visa that you pay off every month. Rebates are applied to balance each month. 1.25% most purchases, 2% on groceries, and 5% on gas
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Recently I did a lot of comparison shopping for credit cards, and I decided on the Chase Freedom card, as others have already mentioned in this post. It gives 3% cashback on the 3 categories you spend most on each month, and 1% on everything else. And, also as mentioned, if you save up $200 in rewards, you get a check for $250 instead. And $50 in rewards when you make your first purchase. Also, I got the Visa Signature version, which has great benefits on its own. If you’re a concertgoer like I am, you’ll enjoy getting front-of-the-line passes to any House of Blues concert that you purchase tickets to with a Visa Signature. It also has built-in insurance on your purchases, should you lose them in some unforeseen accident (something I wish I had before my apartment burned down last year, and I had no renter’s insurance). Most recently I took advantage of its Broadway.com connection to get great tickets to an otherwise sold out show. Just some examples of the perks on top of the cash back features.
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i recently got a credit card offer that interested me.. it was a fidelity credit card.. for every 5,000 points you get.. they will credit $75 into your fidelity account.. not a bad deal
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Since we managed to get ourselves out of debt, we only use credit cards which offer cash back. Now all our grocery shopping it paid for by cash back credit card (and paid off in full each month of course). We get a nice little lump sum from the credit card companies each year now which we use to buy something frivolous! – It’s nice to see them paying us for a change!
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Credit Cards are Not Evil: http://www.nodebtplan.net/2008/01/10/credit-cards-are-not-evil/
Tips:
1.) Only look at cards with No Annual Fee. Annual fees wipe out any benefits offered by the card.
2.) Only get cash back only cards. You can spend the cash. You can’t spend miles, or hotel points, or whatever. Cash is king.
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my card gives cash back to my alma mater, i consider it part of the amount I give.
i never carry a balance, (so the exhorbiant interest rates don’t bother me) and the card has no annual fee (except tax here in Ireland). it allows me have additional cardholders so my wife has a card on the account also.
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My personal experience with credit cards–I like Discover’s customer service a lot, as well as their 30 day billing periods, and they offer both above average rewards and some specialized cards (like 5% back on gas but limited to $1200 in purchases per year). The downside is lots of places still don’t accept Discover. Personally, I like the Pentagon FCU Visa a lot–cash back is 5% on gas, 2% on groceries, 1.25% everywhere else; no fees, and the cash back amount is credited every month on your statement.
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I obtained my students credit card several years ago and never carried my balance. They kept increasing my credit limit and I called them and stopped it. I told them I don’t need a credit balance more than 2000 and have been keeping it that way. That is a USbank Visa card. It has a 1% cashback and no yearly fees. I redeem the points to buy $10 Starbucks card and enjoy starbucks coffee without feeling guilty.
Recently I realize I spend a substantial amount on gas. Discover Road offers 5% cash back on that and a free annual fee. After 5 years I got my second credit card. I use this for only 2 things…gas and medical bills (if I have any). That is it. This way I benefit from this card for gas and only use it for 2 purposes. I still use my other card for groceries etc.
I will not get another card. Two is more than enough. More than this will confuse and upset my balance sheet. Having credit card and paying for everything with it is a plus point for it helps me track my expenses. I make it a point to pay them in full every 20th of the month. That is my rule. I always thought credit card was an asset for I need not carry money so much, thus eliminating unnecessary spending. I had always been surprised why people carry so much credit into it. Credit card had always been deemed bad, but for me, it has always been good. It depends on how you use it. If you have a debt on it, it means you have used tomorrows money today…that thought is scary for me to stay away from debts!
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We have two cash back credit cards from our credit unions (one for household purchases, one for business expenses that will be reimbursed). Although I could probably find a slightly better return if I shopped around, the great service we get through the credit union makes it worth giving up a potential fraction of a percent return. We never have to worry about our payments not posting on time or contesting charges; they always try to make sure we’re happy. I would never go back to a major bank credit card.
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My dad, who’s great with money and has never carried a balance on his credit card (neither have I), advised me at least to consider APR. You never know when you’ll be in a situation where you have no choice but to carry a balance: unexpected medical bills, identity theft drains your bank account and it takes months to get sorted out, payments or bills get lost in the mail, computer problems prevent you from doing online billpay, etc.
Sure, these aren’t very likely to lead to your carrying a balance if you’re careful, but by putting money on your card, you’re committing to pay the balance later, even though you don’t know what will happen while you wait to pay the bill. It really doesn’t change your obligations if something happens to your money between swiping the card and paying your bill, and the creditors will hold that ridiculous APR over your head, and the rewards may not look so nice anymore.
It’s at least something to consider; certainly doesn’t need to be the deciding factor, but you want to recognize and avoid insanely high rates. A small financial hiccup can turn in to a real disaster if your rates are too high; that’s how the credit card companies make money.
That being said, any interest rate is too high to justify carrying a balance. Once you’ve spent all that time finding a reasonable rate, determine never to take advantage of it.
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My tip in credit card shopping – ask your friends if they are satisfied with their cards. An important point here is that you have to consider the friend to consider the quality of their advice. But I asked friends that I knew were fiscally capable about their experiences with Discover before I chose to venture there.
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… by how easy they are to cut up?
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I generally get about $150 a year back from my credit card a year, and have never paid a dime to them. It all adds up. I use a Costco American Express, which gives me a minimum of 1% back on all charges, on up to 5%. I wrote an article about how to use credit cards to your advantage a while back, here: http://20somethingfinance.com/blog/2008/01/04/credit/
It’s easy to say ‘don’t use credit cards’, but that discounts the intelligence of everyone who has the discipline to use them responsibly, IMHO.
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Creditcards.com provides a sortable list of all current credit cards being offered by the major companies. I wrote an article about it recently at :
http://greenerpastures-lisamarie.blogspot.com/2008/02/money-miser-find-best-credit-card.html
Lisa
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A lot of people have been recommending Chase Freedom. Here is the reason why I am hesitant to get it: even though there are many categories listed, there is NO category for either travel (airline tickets) or dining out (full service restaurants). Note that the only restaurants covered are quick-service restaurants (aka fast food). The 2 categories I mentioned (travel and full service restaurants) are the ones I’m looking for a rebate in; I already get a 3% back (in either Thank You Points or rebate) using my Citi Driver’s Edge Mastercard in other categories, details here: https://www.citicards.com/cards/wv/cardDetail.do?screenID=925 (for the first 12 months, you get 6% back in supermarket, drugstore, gas purchases; after 12 months, it’s 3%; for everything else, it’s 1%). Also, you get $1 for every 100 miles you drive. You can apply rebates to tire purchases, car maintenance, etc. Personally, I’ve been turning my rebates into Thank You Points so I can used the fixed flight option. For those who didn’t know, 20,000 Thank You Points can get you a flight anywhere within the continental U.S., no blackout dates (you have to pay tax, ~$50 if I remember correctly). Great card, I highly recommend it.
Back to Chase Freedom, if I don’t find another card with better rewards, I might go ahead and get it. It’s a pretty good deal, just not what I’m specifically looking for. Check out the categories listed and it may be more appropriate for you.
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Didn’t see anyone mention this forum yet, but http://www.creditboards.com I’m sure has a thread on every single card you could ever think of.
JD! Shoot me an e-mail if you’re up for coffee this weekend, I’ll be down in Portland through Monday.
DebtKid
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There isn’t a one size fits all solution. Everyone here has offered great insight. My recent experience was to get a credit card from my credit union. The APR is 8.99%. There are no fees and there is a point system through Visa. (Redeamable for crap I assume.)
The benefit of this card is that I can go online whenever and transfer money to pay off the card. The first month I put $1,800.00 on the card and paid everything off that month. Because I did transfers daily, almost, I paid only $2 or $3 in interest.
I treat it more like a debit card in this regard but I like the safety feature of it being a ‘true’ credit card and I don’t have to worry about my money being compromised by an identity theif.
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In response to Jake’s comment: “If you paid for things in cash you are actually paying 3% or more for things as you will not get that back in rewards redemption.”
Actually, if everyone used cash, prices would theoretically be 3% less. The credit card companies charge approximately a 3% commission for the privilege of accepting their cards. The retailers then pass that commission along to customers–all customers, because the CC companies prohibit them from charging more to CC customers–in the form of higher prices.
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The site I like is Credit Card Tuneup (http://www.creditcardtuneup.com/). It allows you to enter your spending patterns and finds the best card (or combination of cards) for you. For travel and dining out (my own interests as well), the Costco Amex True Earnings card seems like a good choice if you shop at Costco (i don’t so I don’t know how good the card actually is).
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I fully agree with with folks are saying about shopping for the best card. I personally use AMEX as a charge card to pay off at the end of the month and for the points. I was able to get an ipod video and a free airline flight for the points.
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I go with a couple cards but one rule – no interest. DISCOVER was our main one for years and basically paid for most of our Christmas shopping with free gift cards. Last year we got a Countrywide VISA which gives points that can be used to reduce the principal on our mortgage. In the last few months we have accrued enough point to knock $400 off our mortgage. That is $400 we are not paying interest on anymore. We don’t use cash for anything we don’t have to in order to maximize our points on Discover or VISA.
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I’ve got my cards down to 2: Amex Costco card for Costco purchases, restaurant (3%), gas (5% – recent development), and travel (2%). I use the Emigrant Direct Platinum MasterCard for everything else since it’s a flat 1.4% rebate if you keep more than $10K in the Emigrant Direct savings account. The only issue with Amex and the Emigrant Direct cards is that Amex pays once a year and Emigrant pays twice a year only, but it’s a nice fat check every time I get it (feels like a tax return). My usual rebate is ~$700 from Costco/Amex and ~$500 with Emigrant Direct on a yearly basis.
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If you’re in the UK, check out the credit card section of moneysavingexpert.com as they go through and pull out the best deals for different situations.
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I’d LOVE to see more articles about the most responsible ways to deal with credit cards. Not so much how to get out of credit card debt…but more on what kind of bills/expenses could be put on a credit card with little risk but ample rewards (e.g. frequent flyer miles).
Great article!
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I went onto Bankrate.com and then checked out each card site independently .. I ruled out American Express as I found from prior experience that many places just don’t use it… I ended up with a Discover Card and a Citibank card. Each pays high **cash** returns , but limit the returns to ‘the top items you buy’… So I use the Discover Card for meals and groceries, clothing etc… and I use the Citibank MasterCard for construction purchases for my home and rental property and hard goods. In this way, I maximize my returns. Further, I bypassed Airline type miles programs..( In fact, I just donated all the bits and pieces of different Airline Programs that I had not been able to use, which I gathered when I was traveling a lot..to charities )…as I found that when I needed them, I couldn’t use them. I now put my cashback into a high yield savings account (Wamu online at about 4%+), thereby compounding my interest. I also pay off my card every month.
I’d like to add that I use my card a lot, which makes it much easier to keep tabs on my spending and handle my taxes.
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Another important factor for me at least is the best deal when it comes to foreign transactions. Many charge a 3% foreign transaction fee, capital one seems to charge 0%, however they are a pretty scummy company in my experience. I settled on the Penfed rewards card that does the 1.25%/2%/5% rewards schedule, the reason being because it only charges 1% on that fee yet I get 1.25% back.
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I like http://www.creditcardgoodies.com. It’s a site focused on information about cash-back, mile and other reward cards.
I also agree with the poster who likes the Chase Autopay feature. Right on their website, you can set up automatic payments (which you can also cancel or modify on the website). This is a big feature for me, as I occasionally forget to pay a bill and end up getting hit with fees and interest.
I called up my other credit card (which gives me 3% back on restaurants) and they sent me a form that I could fill out to set up auto payments.
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@kemcards: If that other card is a citi card, you can do it at their site by changing the URI to /APEnroll while logged in.
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Since it took a while to get this posted, we ended up getting a new card in the mean time. I still appreciate the information though.
We decided that the convenience of having (almost) all of our online financial accounts in one place outweighed the slightly better benefits of other cards. We ended up getting a card available through our credit union so we can easily transfer money and pay off the card.
The card we got has an 11% interest rate which is less than 1/2 of what our old Wells Fargo card was, and we get 1% back anualy. (There was also an 8.5% interest rate card with 0% back.)
We kept the Wells Fargo credit card open in case of an emergency (like our wallets getting stolen, or problems with our credit union accounts or whatever).
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There seems to be a pretty comprehensive comparison tool at:
creditcards.com
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Hi I was looking for a creditcard recently and found a really great site for comparing credit cards, it’s called creditcardassistance.com. I like it because you can compare credit cards from any category side by side. They have a really cool compare feature that lets you add and remove credit cards that you want to compare. I just thought I would pass it on. I am sure the site gets kick backs on applications but the compare tool makes it worth a look.
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