What to Look for in a Rewards Credit Card

When selecting a rewards card, it is important to consider your situation and lifestyle. The question is not which card is best, the question is which card fits your life best. There are some great rewards cards out there which can amount to a 5% savings on most if not all the purchases you make. The types of rewards offered are different. Some cards offer airline miles, some offer free gasoline, while the ones most universally useful offer cash back. In order to collect rewards, the card must be paid off in full each and every month before the due date. This can be difficult for some people, but if you are sure you are up to the challenge, here are some tips on selecting rewards cards.

  • Look for a card that offers 5% rewards: Do not settle for any less than 3% rewards. 1% and 2% rewards are really not very impressive. Shop around with credit card offers to get the best rewards.
  • Make sure the rewards are cash back, or something else you can use:Cash back rewards are obviously the best, but gas cards are also universally useful to almost everyone.
  • Don’t get a card that offers airline miles if you don’t fly: It takes a long time to add up enough miles to pay for a long trip, and often the airlines have a lot of restrictions which those who do not fly frequently would find inconvenient.
  • If you are a frequent flyer, airline miles could be a great reward for you: Be sure to read the fine print to make sure your situation fits the criteria for using the miles, and that purchases required are things you normally buy, at places you normally shop.
  • Look for rewards over rates: Don’t worry too much about interest rate since the card must be paid off each month. Go for the best rewards package. However if you think there is the remotest chance you could end up with a balance, consider the interest rates. Maintaining a balance will forfeit the rewards.
  • Watch out for late fees: The object of rewards cards is to pay off the bill each month and on time, but it doesn’t hurt to take a glance at the late fees. Being late will forfeit the rewards and will likely result in a substantial late fee. Keep this in mind and be careful to pay on time.
  • Read the fine print: There are many stipulations on which purchases pay a given percent. In order to get maximum rewards read this section carefully and shop at participating stores who offer the most rewards.
  • Look at minimum purchases: For example rewards for gas purchases are some of the highest and most popular rewards, but if there is a $3000 minimum before the rewards start, consider whether the family uses that much gas.
  • Look for maximums on rewards: For example some cards stop paying rewards on gas after the first $300, this would not help anyone. 5% of $300 is $15. That’s not much, especially if there is an annual fee to compensate for.
  • Avoid annual fees if possible: Unfortunately many of the higher rewards cards do charge an annual fee. Read and calculate the family’s normal budget to see if it would qualify for enough rewards to compensate for the annual fee.
  • Compare the annual fee to the potential value of annual rewards: If it doesn’t look like rewards would well exceed the annual fee this isn’t the card for you.
  • Consider your monthly spending budget: While considering annual fees and rewards, please consider the monthly budget and whether you could stay within the budget and still earn enough rewards. Avoid the trap of buying more things in order to get the rewards, only to blow your budget and end up with a balance.
  • It isn’t that you are trying to avoid ‘bad’ rewards cards: The ideal rewards program for one person might not fit the lifestyle of another person at all. Match the rewards and the required purchases to your lifestyle for a perfect fit.
  • Buy fuel at real fuel stations: Often supermarkets and discount clubs do not fit the requirements to get rewards, or those rewards do not pay at the same rate. Check to see which fuel stations qualify for the best rewards.
  • Be aware of the value of rewards: Make sure rewards are actually paying off, and if not switch to another type of rewards card. Possibly the system some cards use doesn’t work as well for some people as others. Keep trying till you find a card that works for you.

This post was written by David, co-founder at Credit Card Compare, who has reviewed many of the top credit cards with rewards on the market for Australian consumers and businesses.

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