Font size will look bigger or smaller relative to the DPI and document size of the file you are working on. If they seem big, you probably have a DPI of 300 or above, with a small document size. So, you can increase your document size, or lessen the DPI depending on the application you have in mind.
You need to work on it with the final output in mind (printed, screen, etc...)
Just to add to bkrike's re dpi settings, make sure you turn off the re-sample image check box, otherwise you'll change the pixel height/width of your image. Make sure the only boxes that are linked, are the print size boxes.
You can also scale text through the edit/transform/scale, without any loss to editing or antialassing.
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