With such a wealth of options available to consumers, choosing a credit card with great rewards has never seemed easier.
Credit cards offer more unique rewards than ever before, making it difficult to choose what would be most useful to you. Should you rack up airline miles or hotel points? Do you spend enough to benefit from cash back? Will you be able to keep track of your rewards?
“You have to be an expert on your credit card,” says Midea Porterfield, financial counselor at Greenpath Debt Solutions, a consumer credit-counseling organization. “It sounds like a lot of work, but it’s worth it in the end.”
Here are some things you may want to consider when choosing what credit card rewards program is right for you:
Be honest about your financial situation
Before you dive into researching credit cards with rewards program, you should decide whether you are ready to take on this financial responsibility.
“That’s the core of making a decision about opening any lending product: That you are financially sound and have the ability to pay,” says Randy Hopper, vice president of credit cards at Navy Federal Credit Union, the world’s largest financial cooperative for members of the armed forces.
Using a rewards card may mean keeping track of your purchases, planning for how and when you’ll redeem your benefits, and balancing your spending between earning rewards and being able to pay your bill each month.
“If you carry a balance, any rewards you earn will be outweighed by your [interest] payments,” says Holly Johnson, a writer and credit card expert for financial blog The Simple Dollar.
If you need to be more organized with your money before pursuing credit card rewards, start that process and educate yourself on rewards card options at the same time.
Find rewards to support your goals
You may want to identify a goal that your credit card rewards can help you work toward. This might be paying for a vacation or earning back money on regular purchases. By deciding what you want first, you won’t waste both time and money earning points that you’ll never use.
If you are a frequent traveler or are planning a trip, airline miles and hotel points might be obvious choices. If you plan to follow a strict budget and save money, a card offering cash back on purchases, or one with a low interest rate and no annual fee, might be the best option because any extra money could go toward an emergency or “rainy day” fund.
“You have to evaluate whether it’s better to put your money in savings or buy things with points,” Porterfield says.
Your goals might also be specific to your job or living situation. According to Hopper, many military members prefer cards that waive foreign transaction fees and accrue airline miles because they can redeem them to fly home from deployments.
The most popular rewards may not be best for you, which is why it is important to know your options before you commit.
“If you want in on rewards but you don’t know exactly what to do with them, get a card with flexible rewards,” Johnson says. Depending on your program, these rewards can be used for flights, products, or gift cards, making them a good option if you’re unsure which reward to choose.
Study those stipulations
Earning useful rewards, though, may not do much if you can’t use them the way you want.
“If you feel like it’s too good to be true, then make sure you read the details because there’s probably a spending cap,” Hopper says. For example, this might mean you can only accrue rewards on the first $1,000 you spend, losing the benefits for any extra purchases.
“And you may want to evaluate what’s required of you to spend to get the points you need,” Porterfield says. For instance, if you have to rack up debt just to get a sign-up bonus, the resulting rate and interest payments might not be worth it.
Although seemingly tedious, the time and effort you spend to thoroughly research your options and any relevant requirements might just be the best reward for your lifestyle – and your pocketbook.
“Some of it can be a hassle,” Johnson says. “But if you’re willing to put up with it, you can get thousands back in free travel and other benefits.”