Rewards credit cards are extremely popular with consumers today. With so many choices available, how do you determine which card is the right one for you? Here are three things you should look for in a rewards credit card before actually putting it in your wallet.
1) Interest Rate and Fee Structures Are Reasonable
Generally rewards credit cards come with higher APRs and fees than a basic, no-frills card. This allows card issuers to subsidize the miles or points they offer from the fees and interest they earn. However, if you are going to be using a rewards card almost every day you want it to be cost-effective. Fees and other charges can quickly negate any rewards you earn. There are many cash-back cards on the market which don’t come with an annual fee- shop around to find the one that works best for you.
Be wary of a card whose annual percentage rate is close to 24% or more. The APR you receive from a card issuer is usually based upon your credit score but most rewards credit cards tend to vary between 14% and 22%. There are a few cards out there that offer lower APRs but you typically need to have an excellent credit score to qualify. If you are someone who doesn’t carry a balance on your credit card then the APR really doesn’t come into play. But if you think you will keep a balance on the card you should always look for the lowest APR possible.
2) Rewards Are Concentrated In The Category That You Spend The Most
You obviously want a card that earns you the most rewards- whether it’s cash back, miles, or points. Go over your own spending habits and see if there’s a category that stands out. Groceries? Gas? Entertainment? Travel? Once you determine where you spend the most money look for a rewards card that offers a generous return on those purchases.
If your spending is spread around fairly evenly you may want to consider a card with revolving quarterly bonus categories. These rewards rates can sometimes be 5% but generally come with a spending cap per quarter. Another option might be a card that offers a flat rewards rate (at least 2%) on every purchase all the time. Remember that great travel rewards don’t mean much if you rarely travel. And generous rewards for dining out are pointless if you seldom go to a restaurant. Look for rewards that match your spending.
3) Rewards Program Isn’t Complicated
To get the most out of your rewards card you want one that is easy to understand and doesn’t put a lot of restrictions and limitations on what you can earn. Make sure you know if there are spending thresholds you have to meet or caps on the amount of rewards you can accumulate. Be aware if rewards expire or if there are exclusions such as certain travel dates. Read the fine print before signing up for any rewards credit card.