Step by Step Guide to Choose a Rewards Credit Card
Choosing a rewards credit card can be a daunting task. Luckily, if you approach it in a thoughtful manner, you can choose the perfect one for you. Here’s a step by step guide for everything you should consider.
What do you plan on using it for?
One of the first things you should think about when choosing a rewards card is what you will be using it for. Some common categories are:
- Groceries
- Dining Out
- Gas
- Everyday Purchases (everything else)
A lot of cards give you a higher percentage of rewards for certain categories. These might rotate, or they could be flat rates.
For example, your card could offer 3% back on restaurants and travel, 2% on gas, and 1% on everything else. Now, if you plan on using your card very often for those first categories, this might be a good deal. However, if you take the bus everywhere and rarely eat out, you might want to look at a card that has a higher everything else rate.
What rewards would you ACTUALLY use?
Additionally, you need to see what rewards you can redeem your points for. Common options include:
- Travel
- Gift Cards
- Products (ex. cameras)
- Cash Back
Then, you need to ask what you realistically will use. Air miles can be a great deal. But, do you always fly the same airline? Will you actually end up using those miles?
Cash back can be a great option if you aren’t sure. You can usually use the cash back to either get real cash or to use as a statement credit.
Something else you’ll want to look at are any extras you get with your card. For example, airline cards will sometimes offer free checked bags and additional extras. These might make it worth it.
What relationships do you have?
Do you have any existing relationships with banks or credit card companies? Many banks offer credit cards and this might be a mental bonus to know your card is with your bank. Or, maybe you know a particular credit card company is really easy to deal with (or not). This can play into how happy you’ll be with your card.
On the opposite side, maybe you don’t want to have a large relationship with a particular credit card company. I personally, have two cards from two different companies. If I get another card, I plan on getting it from a different company. You should also examine your relationships with stores, travel companies, and other companies you use. If you always fly with the same airline, their card may be a great deal for you. Some stores also offer credit cards like Amazon and Costco. If you shop there (you usually get perks), and the points categories are good, this might be a good option.
Annual Fees
Annual fees are not uncommon on rewards cards. They are especially common on ones that offer a higher level of points acquisition or those that have special perks.
It’s likely that you’ll rule out any cards that have an annual fee. I do at this time. However, there are some circumstances where they can be worth it.
One thing to weigh is the amount of perks that you get as it is worth in real dollars. So, if you have an annual fee of $100, but you’ll save $150 in checked bag fees each year, you should still consider the card.
Promotions/Referrals
A lot of times, credit card companies will offer promotions if you open a card with them. Sometimes these can be really good. When I opened my latest card, I got $150 if I spent $1,000 in the first three months. Now, since I put almost everything on that card, it was super easy to get the bonus. If you decide on a card that you want, check around to see if there are any current promotions.
Another option could be a referral. For that same card, if I emailed a link to someone and they opened a card via that link, they would get a $300 bonus (meeting the same requirements as my initial promo) and I would get a $150 statement credit. One of my friends was planning on getting that card anyway and mentioned it to me. Because of that, we both got a little bonus.
So, check with your friends and family if any of them have the card you are planning on opening.
