How to Get Started Earning Rewards

credit_cardsOne of the most frequent questions we get from friends and family at is what cards are the best for starting out and earning rewards. If you aren’t a frequent business traveler or a big spender on your credit cards it’s hard to know where to get started earning rewards that will be worth something.

When I think about credit cards, I judge them in a few specific ways:

  • What are the points/miles/rewards really worth
  • How easy is it to earn rewards
  • Is there an annual fee and how does it weigh against the rewards
  • How valuable the sign-up bonus is
  • Any other meaningful benefits (no foreign transaction fees, purchase protection, rental car coverage, etc)

What are rewards really worth?

Not all miles / points / rewards are the same. Here’s a quick overview on what these rewards are actually worth in dollars and cents:

Rewards Program Value ($0.00)
American Express Rewards $0.02
Barclaycard Miles $0.005 to $0.01
Capital One Rewards $0.01
Chase Ultimate Rewards $0.021
Citi ThankYou $0.016
United $0.015
Southwest $0.013
Virgin America $0.015 to $0.023
Virgin Atlantic $0.015
Hilton $0.005
Hyatt $0.018
Starwood $0.024

How easy is it to earn rewards?

It’s an important to pick a rewards card that actually generates rewards at a reasonable rate. Unless there is a specific sign-up bonus or other reason (affinity for a specific hotel, airline, etc) don’t pick a card that earns rewards at a rate less than 1.5%.

What does the annual fee really mean?

Don’t be scared off by annual fees. Many cards with an annual fee have a materially higher rewards rate than those without an annual fee. These cards also often have better sign-up bonuses.

How valuable is the sign-up bonus?

Some cards have sign-up bonuses worth $500 or more.

Are there any other benefits that are material?

If you frequently travel overseas it’s essential to have a credit card with no foreign transaction fees. Coverage for rental damage or collision included with your card is also a big plus. Extended warranties for items you buy is also a valuable benefit.