With so many credit card offers on the market today, how do you choose the ideal card? Finding the right credit card is as easy as asking the right questions and then seeing which offers fit your specific needs. Here are some tips for choosing the perfect rewards credit card:
Where Do You Like to Spend Your Money?
The most important thing to consider when choosing a new rewards credit card is where you plan to use it. Rewards cards come in several types and amounts. There are retail cards for big brands and department stores; cash back cards that offer enhanced rewards on specific categories; airline and hotel credit cards that reward you for current and future travels, and more.
If you plan to use the card to pay for vacations, for instance, a travel credit card might be your best bet. If you want a travel card but aren’t loyal to a particular airline, a general travel card, like the U.S. Bank Altitude Go or the American Express Green Card, might be a great option. If you prefer a specific brand, such as Hilton or Delta, one of their co-branded cards with Amex might be a better bet.
If you prefer rewards closer to home, consider a cash back card that offers savings on everyday items like gas, groceries, or dining. Some popular cash back cards include the Discover It Cash Back, the Discover It Chrome, Chase Freedom Flex, Freedom Unlimited, and the Capital One Savor.
Are You Willing to Pay an Annual Fee?
If “where to use a credit card?” is question number one, “how often do you plan to use it?” should be question number two. Knowing how often you plan to use a rewards credit card can help you decide if it’s worth paying an annual fee for the card.
Take the travel rewards card example from above, for instance. If you are looking for a travel card but don’t fly enough to warrant an annual fee, the Altitude Go from U.S. Bank is ideal.
However, if you frequently fly and would use luxurious perks, a premium card like the Platinum Card from American Express is a better choice. The Platinum Card features an annual fee of $550 but provides airport lounge access, travel incidental credits, and more. However, flying multiple times per year and making full use of all the benefits and credits offsets this steep yearly fee easily.
The same principle applies to cash back cards. The Blue Cash Preferred Card from American Express offers 6% back on U.S. streaming services and U.S. supermarkets, plus 3% back on gas stations and transit. However, those impressive rewards come with a $95 annual fee (which is waived for the first year).
If you don’t plan on using your card that much, consider the Blue Cash Everyday Card – also from Amex. That card offers 3% back on U.S. groceries and 2% back at U.S. gas stations and department stores – but with no annual fee.
How Can You Redeem the Rewards?
Finally, always know your redemption options when choosing your next rewards credit card. How can you cash out your rewards? Do points or miles expire? Can you transfer your points to another program? These are all examples of the types of questions you should ask yourself. Doing so will set you up to take full advantage of what a rewards credit card has to offer.
Most rewards credit cards give similar award options. These redemption choices include:
- Statement credits
- Gift cards
- Merchandise purchasable via online shopping portals
- Charitable donations
- Travel that can be booked via online portals
As with hotel cards and airline credit cards, some specialized rewards cards also allow accounts to transfer rewards to other loyalty programs. Moving these points or miles to other programs comes with additional questions, such as how much those points are worth after transferring? If you fly with Delta, for example, but prefer to use points with Marriott, how much value will those rewards retail after moving SkyMiles to Marriot Bonvoy points?
Rewards cards offer ample opportunities to save money and earn exciting awards. Before applying, however, make sure to consider all aspects of a credit card to ensure it’s right for your needs and your lifestyle.
It’s not a good idea to force yourself to spend heavily to justify an annual fee. If you get a card with a steep annual fee where you’re not able to take full advantage of its value, consider downgrading to a card with a lower yearly charge – or even an offering with no annual fee from the same issuer.
Related Article: The Best Cash Back Credit Cards for 2020