8 things to avoid when shopping for a rewards card
Some card features sound great, but waste time and money
Freelance writer based in New Rochelle, N.Y.
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So you’re shopping for a new rewards card and there’s an abundance of choices. Sometimes the best approach is knowing what you don’t want.
With that in mind, here’s a look at features that may sound great at first glance, but might end up being a waste of money:
8 things to avoid when shopping for a rewards card
1. A small sign-up bonus.
These are points or cash back that can jump-start your rewards account or be applied to other uses, such as travel or statement credits. The larger the bonus, the higher the appeal (as well as excellent credit required to qualify).
Note, though, that some issuers, such as Chase and American Express, limit the number of cards you can apply for to deter card churners – consumers who open and close cards just to get the sign-up bonus.
“If you potentially have only one shot at getting a good bonus for signing up, you want to make it count,” says Julian Kheel, senior writer with The Points Guy and author of “The Devil’s Advocate” column on BoardingArea.com.
2. A high initial spending requirement
Big rewards come at a cost. Many rewards cards often require you to spend a minimum amount over a certain period – generally three months – before your bonus is awarded. That sum ranges widely, from $500 to thousands of dollars.
If the minimum spend is too steep for your budget, it’s a major red flag. Typically, the more bonus points you get when you sign up, the higher the minimum spend.
Most importantly, apply for the card only when you have a plan in place for meeting and repaying that minimum spend.
3. The card doesn’t fit your lifestyle
The sweetest credit card offer isn’t worth it if the card fails to meet your particular goals. For example, a hotel-affiliated rewards card won’t do you much good if you’re a big Airbnb fan. The upshot: You need to determine whether a travel card or cash back card will best fit how you’ll use the rewards.
Something else to look out for: a low point accrual or, at least, a formula that doesn’t align with your purchasing habits. A card that gives you 2 percent back on travel and 1 percent for other expenses isn’t a great fit if you’re using it primarily for grocery shopping and other everyday purchases.
“Know your spending habits,” says Alanna Smith, editor of TravelPirates.
4. Travel cards tied to a specific chain
If you’re just getting your feet wet with rewards cards, choices that tie you to a particular hotel chain or airline might not be the best bet. Instead, you may want the freedom to explore different options.
In that case, a general-purpose travel rewards card will give you more flexibility. Examples: Cards under the Chase Ultimate Rewards or Capital VentureOne Rewards umbrellas aren’t tied to a specific hotel chain or airline, but points can be redeemed for travel costs on multiple airlines, hotels or rental cars.
5. Not enough of the right perks
Your card may offer extras, but not ones you care about. For example, if you don’t do a lot of international travel, then a card that reimburses you for TSA Pre-check or Global Entry fees won’t be useful. Likewise, a cash back card that rewards you for spending at restaurants is not a good fit if you typically cook at home.
“You want a card that fits your spending style,” says Smith.
6. High annual fees
If you’re a rewards card newbie and aren’t sure which card you want, your best move is not to choose a card with a hefty annual fee. And if you do sign up for a card with a high annual fee, do the math to figure out whether you’ll save enough in other expenses to make it worth paying the charge.
For example, access to American Express’s airport Centurion Lounges is free for Platinum and Business Platinum cardholders ($550 and $450 annual fee, respectively). If you plan on stopping at Centurion Lounges on your frequent travels, the high annual fee on those cards might make financial sense, as entry is restricted to Amex cardholders and can cost $50 each visit for non-Platinum cardholders.
Other cards offer credit for miscellaneous travel costs, including Uber rides, or a free checked bag.
7. Points that expire
It will be a bummer to earn all those rewards, only to have them disappear if you don’t use them in time.
For example, with the Citi/AAdvantage Platinum Select World Elite Mastercard and United MileagePlus Explorer Card, your points can expire after 18 months if you don’t take steps to keep them active, such as earning or redeeming miles, or keeping your credit card account active and open.
On the other hand, there’s no expiration date for miles accumulated with the Gold Delta SkyMiles credit card from American Express.
For details, see “When do credit card rewards, airline miles, hotel points expire?”
8. Relying on Discover or American Express if you travel abroad
In many countries, Mastercard and Visa are accepted just about everywhere. Less so for American Express and Discover. The upshot: If you travel abroad frequently, carry a more universally accepted card in your wallet as a backup.
“You don’t want to stand in line at a shop in London only to learn that your card isn’t accepted there,” says Smith. “Sometimes brand loyalty has to be put on the back burner.”
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