Many people don't bother choosing their rewards credit cards. They wait until some mailing arrives that says they're pre-approved for one, and, if the deal looks reasonable, sign up for it. That's usually a bad idea. Cards are products, just like cars or clothes, and it's worth shopping around to get one that works for you. That needn't be hard or very time-consuming, especially if you access online lists of cards where you can easily compare features.
Choosing Rewards Credit Cards
If it helps, follow MSN Money's recent suggestion, and use the same criteria you would employ when you're clothes shopping:
- Affordability: Yes, designer duds may be higher quality than bargain basics, but buy them only if you can afford to. It's sometimes worth paying an annual credit card fee, but only if the benefits it buys you exceed the cost. If you won't pay down your balance in full every month, you need to pay close attention to interest rates. Some cards offer tempting one-time sign-up bonuses. Don't be seduced by these, but coolly include them in your assessment.
- Fit: If you're agoraphobic, you won't spend much on outdoor clothes. You also won't be interested in travel rewards cards. That's an extreme example, but there's plenty of plastic that's designed to meet the needs of particular groups of consumers. For example, some offer rewards that are intended to appeal to moms and dads, others that are great for those who spend a lot on gas, and still others work well for students, say, or adventurous vacationers. Pick the card that's the best fit for your needs.
- Style: Some cards bring particular prestige, most notably black and platinum ones from American Express, although there are plenty of others. They tend to come with high annual fees, but also rich rewards and perks. Think of them as daring haute couture from top designers: worth it if you can carry it off. But don't apply for them unless your credit score's stellar; too many failed applications can drive that score down further.
- Comfort: Unless you're a fashion victim, you need to be equally comfortable in your clothes and with your cards. Some plastic offers very generous bonus earnings rates on categories of shopping that change each quarter. But you only get that rate (usually 5 percent) if you first remember to re-register each quarter. And you need to follow other rules to make the most of these. If you're an organized individual, comfortable managing your account and spending in this way, these can be great products. If you're not, find a card that earns a reasonable amount without your intervention.
- Value: Maybe the hardest part of choosing the right card is comparing rewards programs. It's easier with cash back cards, because it's obvious what 1 or 2 or 5 percent on the dollar is worth. But the value of one card's mile or point may be different from another's. They may also vary in value depending on how you redeem them. There's only one way forward: make a short list of the ones you like best, and then read the relevant small print for each.
- Fashion: Just like clothes, cards can become dated and unattractive as better ones come along. Keep an eye out for new products, and improvements to existing ones, and don't hesitate to keep the plastic in your wallet at least as up-to-date as the contents of your wardrobe.
Using Rewards Credit Cards
On average, rewards cards charge higher interest rates on outstanding balances than their non-rewards counterparts. And that gap in rates is likely to eat up the value of all the rewards you earn -- and more.
This simple fact lies behind the cardinal rule for using these cards: never -- unless you really have no choice -- run a long-term balance on one. If you must have card debt, apply for low-interest plastic and put all the purchases you can't pay for within the current billing cycle on that. At the time of writing, the Barclaycard® Ring MasterCard® is charging just 8 percent APR on purchases, which could easily be half of many rewards cards' rates.
The only other rule for using these cards is to understand and observe your rewards programs' terms and conditions. Might your points or miles expire? Are there caps on what you can earn within a particular period? Is there a minimum value set for each redemption you make? Does your airline card have blackout dates that prohibit flying at peak times? Will it cover the full cost of travel, or will you have to pay fees and taxes yourself?
Generally speaking, there are way fewer restrictions on these programs than there used to be. And you stand to earn serious money or value from your rewards credit cards -- often hundreds of dollars a year; maybe thousands. Just be sure to pick your plastic with care, and then use it intelligently.
Disclaimer: The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we can not guarantee the accuracy of the information in this article. Please verify all terms and conditions of any credit card prior to applying. Check our credit card database for updated terms and conditions.
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.
Disclaimer: This content is not provided or commissioned by Barclaycard. Opinions expressed here are author’s alone, not those of Barclaycard, and have not been reviewed, approved or otherwise endorsed by Barclaycard. This site may be compensated through the Barclaycard Affiliate Program.