Credit Cards Explained: What NerdWallet Gets Right (And What They Don’t Tell You)
I’ve spent an unreasonable amount of time on NerdWallet’s credit card comparison pages. It’s become a habit — every few months I check whether there’s a card that better fits my spending patterns. Sometimes there is. Usually there isn’t, and I just spent 45 minutes confirming what I already had was fine. But going through that process taught me more about credit cards than any financial literacy class ever did.
Here’s the practical version of what you need to know.
How Credit Cards Actually Work
A credit card is a short-term loan that resets monthly. Your card issuer gives you a spending limit based on your credit profile. You charge purchases against that limit. At the end of the billing cycle, you get a statement. Pay the full balance and you owe zero interest. Pay less than the full balance, and you’ll get charged interest on the remaining amount — typically somewhere between 18-28% APR, which is brutal math if you carry balances for long.
Beyond interest, watch for annual fees (some cards charge $95-550 per year), late payment fees ($25-40 typically), foreign transaction fees (usually 3% of each purchase abroad), and cash advance fees (expensive — don’t use your credit card as an ATM unless you’re truly desperate).
Card Types That Matter
- Cash back cards: The simplest option. You spend money, you get 1-5% back depending on the category. Good for people who want rewards without thinking about points systems. The Citi Double Cash (2% on everything) and Chase Freedom Unlimited (1.5% flat + category bonuses) are the two I see recommended most, and they both make sense for different spending patterns.
- Travel rewards cards: These earn points or miles redeemable for flights, hotels, and travel expenses. Worth it if you travel regularly. Not worth it if “I’ll use these points someday” means they sit unused for three years. The Chase Sapphire Preferred and Amex Gold are the entry-level standards here.
- Balance transfer cards: If you’re carrying high-interest debt on an existing card, transferring it to a card with a 0% introductory APR buys you time to pay it down without interest piling up. Usually comes with a 3-5% transfer fee. Do the math — the fee is almost always cheaper than the interest you’d otherwise pay.
- Secured cards: Require a refundable deposit that becomes your credit limit. These exist for people with no credit history or damaged credit who need to build or rebuild. They’re not exciting, but they work. I had one in college and it served its purpose.
- Student cards: Lower limits, fewer features, but designed to start building credit history. If you’re in college, get one, use it responsibly for a small recurring charge, and pay it off monthly.
- Business cards: Separate your personal and business spending, earn rewards on business expenses, and often come with higher limits. If you’re self-employed or run a small business, a business card simplifies your accounting significantly.
What to Look At When Comparing Cards
NerdWallet’s comparison tool does a decent job at surfacing the right information, but here’s what I actually evaluate:
Does the annual fee pay for itself? A $95 annual fee card that gives you $100 in travel credits and airport lounge access is net positive if you use those perks. A $95 card where the rewards barely cover the fee? Skip it.
Where do I actually spend money? Getting 5x points on streaming services means nothing if your streaming bills total $30/month. I focus on groceries, restaurants, and gas — that’s where my family’s spending concentrates. Pick a card that rewards what you buy, not what sounds impressive on a spec sheet.
Sign-up bonuses: These can be worth $500-1,000 in value if you meet the minimum spending requirement. But — and this is important — only go after a sign-up bonus if you can hit the required spend with purchases you’d make anyway. Buying things you don’t need to earn a bonus defeats the purpose.
The APR: If you pay your balance in full every month (which you should), the APR doesn’t matter. But life happens. Having a lower APR as a safety net for the month your car breaks down and you need to carry a balance isn’t a bad thing.
Building Credit: The Boring Part That Matters Most
Your credit score determines what cards you qualify for, what interest rates you get on loans, and sometimes whether you get approved for an apartment. Building good credit isn’t complicated — it just requires consistency.
- Pay on time, every time. Payment history is roughly 35% of your FICO score. Set up autopay for at least the minimum payment. One missed payment can drop your score 50+ points and stay on your report for seven years.
- Keep utilization low. Use less than 30% of your available credit. Under 10% is even better. If your limit is $5,000, keep your balance below $500 when the statement closes.
- Don’t close old accounts. Length of credit history matters. That first credit card you got years ago? Keep it open even if you barely use it. Charge something small once a quarter so the issuer doesn’t close it for inactivity.
- Space out applications. Each credit card application triggers a hard inquiry that dings your score slightly. One or two applications per year is fine. Applying for five cards in a month looks desperate to credit scoring algorithms.
Where NerdWallet Adds Value
The comparison tools are genuinely useful for filtering cards by category, fee structure, and credit score requirement. The reviews are generally balanced — they’ll note both pros and cons of a card rather than just selling you on it. Their calculators help you figure out whether a specific card’s rewards outweigh its costs for your spending pattern.
The disclosure worth knowing: NerdWallet earns referral fees when you apply through their links. This doesn’t mean their reviews are dishonest, but it does mean every card they recommend is one they have a financial relationship with. Cards they don’t have deals with may not appear in their comparisons at all. Cross-reference with other sources if you want the complete picture.
The Strategy That Works for Most People
One no-annual-fee card with 1.5-2% cash back on everything. Use it for all purchases. Pay the balance in full every month. That’s it. You’ll earn rewards without tracking category bonuses, without paying fees, and without any of the complexity that makes credit cards feel overwhelming. Once you’re comfortable, add a second card with higher rewards in your top spending category if the math makes sense. Keep it simple until you have a reason not to.
