If making smarter financial decisions is one of your goals this year, choosing a rewards credit card should be at the top of your list. But with so many options out there, it can be overwhelming to choose the right one for you.
Here are a few questions to get you started:
What Kind of Spender Are You?
First, determine your spending patterns. What are you most likely going to be buying with your rewards credit card - everyday purchases like groceries and gas or big-ticket items like a new TV or tablet?
If you’re a big spender and will be using your card for major purchases, look for cards that have an annual fee. While most of us run the other way when we see an annual fee, these types of cards actually favor big spenders, meaning you’ll earn better (and more) rewards.
If you’re looking to build your credit, with small, regular purchases as your goal, look for a rewards card that gives you incremental points and bonuses based on common, low-priced items such as fuel or groceries. And avoid cards that require a minimum balance to earn rewards.
If you’re a frequent flyer, you’re a prime candidate for a rewards credit card. Before looking into the different types of travel rewards credit cards, make sure that you look for cards that omit foreign transaction fees and require you to use a pin (chip-and-PIN) rather than just a signature for transactions, this will help make sure that you’re able to use your card abroad.
What Kind of Rewards Do You Want?
Once you’ve determined what type of card is best for your spending, the next step is to figure out what kind of rewards you're hoping to earn. What rewards are most important to you?
If you want to be committed to earning and then using your rewards all in one place, look for rewards cards that allow you to transfer your points to other loyalty programs, such as American Express Membership Rewards or Chase Ultimate Rewards.
These cards allow you to earn points with your card and transfer them into the loyalty programs of various travel and retail partners and convert those earned points into loyalty points with other programs. But with this flexibility, it’s key that you stay organized with all your programs to avoid missing offers or expiration dates.
If you only fly certain airlines or book rooms with a certain hotel chain, look for cards that are associated with those brands, such as the United MileagePlus Explorer or Citi Hilton HHonors Reserve. These cards will help you get the most rewards for your spend.
What’s in the Fine Print?
Now that you’ve narrowed down your rewards card choices based on your spending and reward preferences, ask yourself these questions before you sign up.
What’s the minimum you have to spend to earn a reward?: You’ve likely seen credit card companies entice you with flashy sign-up bonuses, but many times these bonuses require a minimum balance for you to actually earn them. Make sure you check out the minimum and evaluate the probability of whether you’ll actually be able to earn that reward.
Is there an expiration date for rewards? Some rewards cards require you to spend your rewards in as little as a year, while others allow you to use those rewards as long as the card is open.
Confirm that the card’s reward expiration date is a timeline that works for you before signing up, and after choosing your card, keep a close eye on those dates.
Is there a redemption threshold or cap? Some cards require that you accumulate a certain amount of points before you get the full value, and others allow you to earn only a certain amount of rewards in a span of time. Check out these specifications before opening a card to be sure of how many rewards you’ll actually have to, and be able to, earn and spend.
With so many rewards credit cards available, it’s important to find the card that that best fits your lifestyle.To take full advantage of a rewards card, know your spending tendencies, determine exactly what type of rewards you want and always be sure to read the fine print.