The average American has 3-4 credit cards, and of those, at least two cards earn rewards. Rewards credit cards are a fantastic tool that most people have in their wallets but very few are using to the fullest advantage. Usually, card users focus on more common benefits, such as purchase protection and extended warranties. However, when used appropriately, rewards cards can help you take trips, make purchases, and generally accomplish things you would otherwise be unable to afford. Understanding how to manipulate this situation to your advantage can be the answer to your next vacation, date night, or Christmas shopping spree. The question is, how should you get the best rewards with your credit card?
Know What You Want
Before you get a rewards card, you need to know what type of card would be best for you. Consider what kinds of rewards you actually want from a credit card. While there are a wide variety of rewards cards, within that range are three main categories, one of which is the best option for you:
- Fixed Value Credit Cards: These credit cards tend to be the easiest to use and to understand. The rewards on these cards are small, usually around 1-3%. However, according to The Points Guy, there are a few main benefits for getting a fixed value rewards card, including the fact that they are easy to use because the number of points you earn for each dollar spent is a fixed value, and that applying your points is pretty flexible for any airfare or hotel. Fixed value rewards credit cards also tend to have cash back options, which some people find extremely valuable.
- Cobranded Credit Cards: A co-branded rewards card “is jointly sponsored by both a bank and a retail merchant.” The benefit of a co-branded rewards card is also a disadvantage: credit cards affiliated with specific merchants can give card holders access to discounts, rebates, points, or other rewards, but only with that specific merchant. However, these rewards cards are usable with merchants other than the one sponsoring it.
- Transferable Points Credit Cards: With a rewards card like this, points can be transferred from the card “to any of their participating programs,” spanning across many airlines, hotels, and other vendors. This card is a pretty solid compromise between the freedom of a fixed value card and the restrictions of a cobranded credit card.
Know Where to Go
Choosing the best card can be an overwhelming task because so much information is so easily available. There are three main routes you could take to finding the best rewards credit card for you:
- Financial Websites: The web is full of sites dedicated to credit cards, so if you are tech-savvy and a good researcher, this is an easy option you can take advantage of at home.
- Your Bank of Choice: You can directly open a rewards card through your bank, and often very easily through their website as well. You can also make an appointment to meet with a representative and discuss your options.
- Direct Mail Advertising: Many credit cards send targeted marketing material to consumers’ homes directly. Again, be sure with this option to do some research and consider the benefits and disadvantages of each particular offer.
Know the Particulars
Read the fine print. There is no need to be caught off guard when it comes to restrictions and expiration dates, but many people make assumptions about their rewards that can have disappointing or even devastating consequences.
- Minimum Spending Requirements: A minimum spend is the absolute lowest amount of money that a cardholder must spend using the credit card within a given time frame. No card charges a holder for not spending a minimum amount. However, if a cardholder does not meet this minimum expenditure, he or she sacrifices access to bonuses.
- Annual Fees: Rewards credit cards are more likely to have annual fees, which are automatic charges made to your card once every year in return for “the convenience of the credit card.” An important detail to keep in mind is the ratio between how much your rewards card costs – or the annual fee – and how much your use of the card actually benefits you – the rewards. If the latter does not outweigh the former, you may want to reconsider your credit card.
[Read: How to Organize Credit Card Debt]
Rewards cards are excellent tools, but like all credit cards, the temptation to overspend is ever present. In fact, the urge to make purchase after purchase on your card can be even higher when you know that, in return for those purchases, you’ll be stockpiling points, cash back, or other rewards. If you find yourself falling into debt because of the easy justification a rewards credit card brings you, it may be time to seriously reconsider whether or not it is best for you.