With so many rewards cards to choose from, answering a few questions can help you pick the best one for your needs.
A rewards credit card can be an easy way to get something back for the things you buy.
Whether you’re earning cash back on groceries, frequent flyer miles or points on dining out, it all means the same thing: getting some of what you spend paid back to you.
But with so many rewards cards to choose from, how do you pick the right one? Here are a few tips for finding the best option for you.
Will a rewards card work for you?
Before you start shopping around for rewards credit cards, first ask yourself if it’s what you need.
For example, getting a rewards card may work for you if you:
- Have a good credit score. A higher credit score can make it easier to qualify for cards that offer premium rewards, features or other benefits.
- Pay off your balances. Paying off your balance in full each month can help you avoid interest charges. That means interest isn’t eating into the value of the rewards you’re earning.
- Score the sign-up bonus. Many rewards cards offer an introductory sign-up bonus. If you’re able to qualify for a welcome bonus, that could be a quick way to bank some extra rewards in the first few months after you open the account.
- Spend in specific categories. Some rewards cards have a flat rewards rate, while others have tier rewards, which means you’ll earn more points, miles or cash in certain categories than others. It might make sense to choose a card with rewards tiers that match your spending habits over one with a flat rate or no rewards at all.
- Are loyal to certain brands. Brand loyalty could work in your favor when you use a rewards card. For example, you might be able to gain elite status or unlock special discounts or privileges by using a co-branded hotel or airline rewards card.
- Plan to travel: Travel isn’t always cheap but travel credit cards can offer an easy path to savings. Earning miles or points on purchases, for example, could translate to free flights or free stays.
If you can check off each one of these boxes, opening a rewards credit card could make sense for you. On the other hand, getting a rewards card may not make sense if you only plan to use your card as a backup funding source in emergencies or you’re not interested in rewards. You may also might consider a 0 percent introductory APR balance transfer card if consolidating high-interest credit cards is your goal.
Questions to ask yourself before choosing a rewards card
The rewards card field is broad and the number of choices may seem a little daunting. But you can narrow the possibilities down by asking yourself a few simple questions.
Do you prefer to keep it simple?
As mentioned, some rewards cards offer a flat rewards rate on purchases. For example, you might earn 2 percent cash back or unlimited double miles on everything you spend.
Other cards offer tiered rewards. So, you might earn 5 percent or 6 percent back on groceries, for example, and 3 percent back on gas.
And some cards offer rotating bonus categories. With this type of rewards structure, you might earn 5 percent back on dining purchases on up to the first $1,500 you spend for the quarter. Once the new quarter starts, the 5 percent rewards rate applies to a different purchase category.
If you’d rather keep it simple, flat-rate rewards might be the way to go. Estimating how much you could earn in rewards per year with each type of card can help you decide which option might work best.
How do you spend your money?
Finding a rewards card that aligns with how you spend is key to making the most of rewards. For example, if you mainly charge groceries and gas each month, it might not make sense to get a card that rewards you for booking travel.
So, look at how you normally spend. A simple way to do that is to go through your bank or credit card statements for the past six to 12 months.
As you go through your purchases, group them together into categories. There might be one for groceries, one for gas, one for dining, one for travel, one for shopping and one for miscellaneous purchases.
Grouping expenses together in this way can help you decide what type of rewards card might suit you best. Depending on how you spend it, you might even feel that it makes sense to have more than one card (essentially, a cash back credit card for groceries, a miles card for travel and so forth).
Are you a foodie?
Some rewards credit cards are designed with foodies in mind. Their rewards programs tend to be structured around the things foodies spend money on most often. That means things like dining out, food delivery services and groceries.
If you’re part of the foodie set, you may want to consider a card that caters its rewards to how you spend.
How do you travel?
Taking trips can add up, but the right rewards card can make those purchases less burdensome on your budget. When choosing a rewards card, it helps to consider how often you like to travel and how you book travel plans. If you’re new to travel rewards, you might want to start with a basic travel card.
For example, if flying is your preferred way to get around, you might lean toward a rewards card that offers miles or points on purchases. The more miles you earn, the more free flights you’ll be able to take.
You might want a card that rewards you on all travel purchases if you rely on rental cars or you prefer to take cruises or travel by train. Just be sure to check for exclusions first, as some cards have a narrower definition of what constitutes travel than others.
Do you favor certain airline, retail or hotel chains?
Brand loyalty can pay off if you’re using a rewards card that offers rewards or other benefits for flying with a particular airline, shopping in certain stores or booking rooms at specific hotel chains. If you naturally favor one brand over another, your choice of rewards card may want to reflect that.
On the other hand, you may want to go with a card that isn’t brand-specific if you don’t always choose the same airlines, stores or hotels. For instance, you might look for a travel rewards card that offers points that you can transfer to partner frequent flyer programs on a 1:1 basis. This way, you’re not missing out on any chances to put your rewards to work.
Other rewards card benefits to consider
When comparing rewards credit cards, the rewards program might be your main focus. However, it’s important to look beyond rewards and consider any other features a card might have to offer.
The following are some of the features and benefits you might find with a rewards card:
- Free checked bags
- Priority boarding
- Airport lounge access
- Rental car discounts and insurance
- Access to hotel discounts or exclusive perks
- Resort fee discounts or waivers
- Fee waivers for Global Entry or TSA PreCheck
- Concierge service
- Cellphone protection coverage
- Purchase protection
- Extended warranty protection
- Travel insurance
- Credit monitoring
- Fraud protection
The more benefits a card comes with, the more value it may hold. Whether those benefits prove valuable to you depends on how likely you are to use them.
So, a frequent traveler may appreciate airport lounge access or free checked bags. An everyday spender may be more interested in purchase protection or extended warranty coverage. Looking at the bigger picture with rewards cards can help you gauge what it might be worth to you.
What fees are associated with rewards credit cards?
Here’s a look at the most common credit card fees and how they’re assessed.
- Annual fee: Many rewards cards charge annual fees. These fees can range anywhere from $95 per year to $695 for the most popular premium travel cards. However, some rewards cards waive the annual fee in your first year of membership.
- Finance charges: This is how much you’ll pay if you carry a balance and don’t pay your bill in full each month.
- Foreign transaction fee: Some cards charge a fee when you use your card outside the U.S.
- Balance transfer fee: Most cards charge a fee when you transfer a balance from another credit card.
- Cash advance fee: Some cards charge a fee if you use your card at the ATM or to get cash from your bank.
- Late fees: You’ll pay a late fee if you don’t pay your balance by the due date.
If you’re considering a card with an annual fee, ask yourself how quickly you could earn it back in rewards. Ideally, you’re earning more than enough rewards each year to offset the fee. Or at the very least, the card comes with benefits that make up for the fee.
Aside from the fee, check the APR that applies to purchases so you know how much you might pay if you carry a balance each month. If the card has an introductory APR for purchases or balance transfers, be sure you know when that promotional period ends. This way, you’ll know how much time you have to pay off purchases or transfers before the regular APR kicks in.
If you want to earn something back when you spend, rewards cards can be a great addition to your wallet. Choosing one doesn’t have to be difficult if you ask the right questions and do your research.
CardMatch can help you to determine which cards you’re likely to qualify for without harming your credit score. The next step is to compare cards to find the best mix of rewards, features and benefits for your needs.