With virtually all credit card issuers offering rewards, the issue is not whether you should get a rewards card, but what type of rewards card is best for you
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By Amy E. Buttell
With all credit card rewards programs available, the issue is not whether you should get a rewards card, but what type is the best rewards credit card. But it’s a confusing marketplace, with cards touting cash back, points or miles and other incentives to get your business. To top it off, you’ve got to consider basic factors such as annual fees, interest rates and other terms.
“When considering a rewards card, the most important issue is to put some thought into it,” says Scott Crawford, co-founder and vice president of product and marketing at Ascend Consumer Finance. “You can look at something online or get an application in the mail that seems like the best thing ever, but if it doesn’t fit what you’re interested in, then it just won’t work for you. Like if you have an airline miles card, but if you don’t fly much, that isn’t a really good deal.”
Similarly, if you have a card that rewards you points for your purchases, but you don’t remember to redeem them, the rewards program isn’t worth much.
See related: Debit card rewards programs gaining acceptance
So here are the seven tips you need to keep in mind when adding a rewards card to your wallet:
1. Align rewards with your interests. Reward card programs come in many different forms — generally allowing you to accumulate points toward merchandise, gift cards, travel miles or points or cash back — so it makes sense to align rewards with your interests and goals. If you’re hunkering down and trying to budget your income better, you might choose a card that offers cash back toward such basics as shopping at your favorite grocery store or filling your gas tank. If traveling is your thing, the best airline miles reward card for an airline that flies out of your local hub may do the trick.Just don’t pick a rewards program that you aren’t likely to use. Also be wary of rewards that end up enticing you to spend more money — such as those that you require you to meet a certain spending requirement within a specified time period — because you very well may end up spending more money than you otherwise would have.
2. Cash back is king. Cash-back rewards cards give you the most basic currency available — cash — to spend as you like. According to a 2015 CreditCards.com survey, cash-back rewards are nearly three times more popular than airline rewards or hotel rewards programs. The “cash” can be applied toward your balance or can be redeemed for purchases, or can even be mailed to you by check. says Roger Brooks, senior vice president of business development at ZipLine Payments.
3. Compare the reward offer with others. A major mistake many consumers make is to add a credit card to their wallet on impulse, says Crawford. “I used to work in credit card marketing, and it’s amazing how little thought people put into getting a credit card offer. I would say that most credit card decisions tend to be made on impulse.”
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Instead of making a spur-of-the-moment decision, take a few minutes to compare the offer with similar card offers online, as well as with the rewards terms of the cards currently in your wallet.
Know that most travel-related rewards cards come with an annual fee. Sometimes that fee is waived the first year, but if you’re not racking up and redeeming enough miles or points, the annual fee can negate the value of the rewards. “You can destroy all the value of your rewards card even with a modest annual fee,” Crawford says. On the flip side, there are more cash-back card offers that don’t carry an annual fee.
4. Dump less rewarding cards. If you’re carrying several rewards cards, you may be diluting the value of your rewards by rotating charges across them all instead of focusing all your spending on one card that rewards you the most. Cards with annual fees and higher interest rates should be evaluated carefully to see if they are worth keeping. If you are going to add a new rewards card and dumping others, do the dumping carefully so as to not negatively impact your credit score. In other words, don’t close numerous cards at once, and consider keeping one or two of your oldest cards open.
5. Run your spending through one card. Once you’ve narrowed down the number of cards you’re using,, try to put as much as your spending on that card as possible to maximize the rewards program value. It’s not going to do you much good to have a great rewards card if you don’t use it. Of course, you don’t want to spend money you don’t have just to get rewards, but if you typically do put certain expenses on your card, put those on the rewards card first. That way you’ll get the most bang for your spending buck as possible in the form of your preferred reward. To keep your card balance and budget under control, you may want to make weekly card payments online to avoid having to face a surprise at the end of each billing cycle.
6. Know when your rewards points expire. Be sure to check the fine print in your credit card agreement or on the reward card’s website to see when your particular rewards expire. “Typical reward expiration is 12 to 18 months, with some going out as long as 24 months,” says Roger Brooks, senior vice president of business development at ZipLine Payments. “Sometimes you can buy your points back after they expire, but it’s best to use them before the expiration date.”
See related: Trips and traps of credit card rewards programs
7. Keep track of changes in terms. Credit card issuers are notorious for changing terms. When they do so, they have to notify you, but the problem is, you’re not likely to even read what they send, since it generally comes in the form of a dense snail mail notice in fine print. However, a change in rewards terms, such as getting fewer points or a lower percentage of cash back, is something that will typically be disclosed in such a notice, so you need to take a minute to examine the notices your card company is sending you.
If a change in reward terms is material, you can always start the process of looking for another, more beneficial, card again, provided you have managed your other cards well and you have a good credit score.