5 questions for picking a rewards card -- and 1 that shouldn't matter

If you don't carry a balance, consider how you will earn points and redeem them


Cashing In
Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for

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Question Dear Cashing In,
Which is a better: a card with triple the rewards on any one category per quarter at 17.99 percent, or no rewards at 14.99 percent? Or is neither a good deal? -- Tim

Answer Dear Tim,
Evaluating whether a card is a good deal can be a tricky process. What's a good deal for you might be a poor deal for me, since we are likely to spend money in different ways and value different kinds of rewards.

However, in your case, I can tell you that probably neither of those cards is a good deal for you. Here's how I know: If you are asking about a credit card's interest rates, that indicates you are likely carrying a balance or plan to carry a balance. If you plan to carry a balance, you should focus on paying off the balance -- not on rewards. The amount you pay in interest would almost certainly drown out any value from rewards. 

Certainly, in that case, a card with a lower interest rate is superior, so the one with the 17.99 percent APR is definitely out. I'm guessing you can also do better than 14.99 percent interest. You can probably find a card that charges no interest on new purchases for the first year or two, and perhaps one with modest interest on balance transfers.

With a balance paid off, you can then start picking cards based on their rewards. Here are five key questions to ask: 

1. Is there an annual fee? Generally, cards with higher annual fees will offer more lucrative rewards than those with no fees. Some cards will waive an annual fee for the first year as a means of getting you hooked. Before paying an annual fee, make sure you are using the card enough to derive rewards from it that are worth more than the fee you are paying.

2. Is there a sign-up bonus? Sign-up bonuses on reward cards can be a smart source of points or miles. In some cases, the cards offer an immediate value of a few hundred dollars in rewards, after spending a certain amount in the first few months. Cash-back cards typically do not have sign-up bonuses. 

3. How will I maximize points from spending? You'll want to think about how you will use the card. If it offers extra points at restaurants, for instance, you'll want to use it whenever you go to a restaurant. You'll also want to examine the details of any caps on rewards. For instance, if you get a card that offers bonuses for shopping at grocery stores, but it caps the rewards at the first $1,500 of grocery spending per quarter, it would be hard to accumulate big rewards from grocery spending.

4. Are there other perks I will use? Besides the points or miles, some cards come with other perks that can be valuable. On airline cards, there are cards that come with a free checked bag, priority boarding and lounge access. Some hotel cards come with automatic elite traveler status, which can score you upgrades, late checkout and complimentary Wi-Fi, for instance. Considering how much you would use these perks, and how much they are worth to you, is an important part of selecting a new rewards card. 

5. How do I redeem my points? Accumulating lots of points is fine -- great, even -- but make sure you understand how you can redeem them. If you amass frequent flier miles on an airline known to be stingy with award seats, those miles could be less valuable than fewer miles on an airline with solid award availability. Hotel programs tend to be even more complicated than airline programs. Cash-back cards tend to be more straightforward.

Tim, there are plenty of valuable reward cards out there. Paying off your credit card balance is an essential prerequisite to looking for the right reward card for you.

See related: 2015 Balance Transfer Survey: Offers more generous, but move fast, 5 tips for negotiating rewards cards' annual fees

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Published: July 7, 2015

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