Choosing a credit card

Credit card benefits are the rewards you get for using a particular card. Often, the more you use your credit cards and the higher the annual fee you pay for it, the richer the benefits you’ll get. These can vary from points you collect and exchange for anything from airline tickets to CDs, contributions to a favorite cause to restaurant discounts, and warranties on purchases made with the card to travel health insurance. The list is practically endless.

The benefits are meant to give consumers a reason to pick one card over another. Since interest rates and other financial terms for many credit cards are quite similar, the restaurant discount or points you earn by using a particular card is often the most compelling reason to choose it over the myriad others out there.

Credit card benefits also take the focus off the interest rate that you are charged for outstanding balances. This is not a good thing if you carry a high debt load. You are better off focusing on the card’s interest rate and whether it varies with the prime rate or is fixed at 18 percent or more. A free trip earned through points is not a good swap for paying five percent more a month in interest. The savings from a less expensive card might pay for two trips in the time it takes you to earn the points for one.

But if you do pay your balance every month, you may as well cash in on the benefits. Here are some tips to help you select the card or cards that have the best benefits for you:

Read the fine print. Are you really going to get the benefits you want? Find out how you earn points and the point levels for the benefits you want. Make sure that upfront or annual fees are not so large as to erode the value of the benefits you can earn. With affinity cards, how much is your charity or designated beneficiary really getting? Is it worthwhile or is a simple tax-deductible contribution a better way to support them?

Check your spending level against the amount required to earn the benefits. Will you use the card enough to earn the rewards that look so tempting? If you have multiple cards, will you likely spend enough on a particular one that it delivers the benefits you want?

Consider the inconvenience of using (and paying for) several cards. With multiple cards, add up all the service or other fees you pay to make sure the benefits you’re getting are worth it. Keep in mind that you may not spend enough on one card to earn the rewards at all. With multiple cards, you can also more easily lose track of your level of debt.

Be careful not to overvalue benefits you will not use. Priority reservations at luxury resorts or first call on tickets to popular performances are good benefits, but only if you go to these resorts and typically attend the shows you now are guaranteed to be able to see.

Make sure you understand the conditions that apply to retail warranties that come with credit cards. Often there are restrictions as to the kind of goods that are (and are not) automatically covered, the time frame in which you can make a claim, and the circumstances in which you will be compensated for damage or loss.

Study the fine print of out-of-country travel or car accident insurance. There are often many restrictions on coverage, so don’t be too quick to assume your card provides adequate health insurance when you travel or that you don’t need insurance from the agency next time you rent a car.


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