Credit Card Education Guide

How to Find the Best Rewards Credit Card

The first step towards finding the best rewards credit card is to look at your expenses and determine where you spend your money. The most important spending categories for earning rewards are travel, gas, drugstore and grocery purchases. These categories are often well above the standard cash back rate of 1% and can be as high as 5%. This type of offer does not exclude you from earning the standard cash back rate in all other categories, which means nobody should settle for the standard cash back rate across the board.

Travel Reward Credit Cards

Frequent travelers should be looking for airline or hotel credit cards. At first glance an airline credit card might appear to be an excellent choice, but airline rewards are not as rewarding as they used to be. The additional fees and taxes are often not included in the award redemption, so that free ticket could end up being quite costly. You also have to factor in the annual fee of carrying an airline credit card, which is typically around $75.

The alternative for the frequent traveler is a hotel credit card, which is associated with a much lower annual fee and a free night actually means a free night with no hidden fees. The fact that it is a hotel credit card does not mean it can only be used for redemption of free nights. The Starwood Preferred Guest® Credit Card from American Express® not only gives you the choice of 890 hotels all over the world, but also offers the opportunity to transfer miles to most major airlines.

Cash Back Credit Cards

For people that do not travel often there are plenty of other reward cards to choose from. First you have to decide between cash back credit cards and points credit cards. Cardadvantages recommends the cash back rewards for a couple of reasons. Cash back is usually automatically credited on the next statement. There is no need to accumulate a certain amount of points in order to reach a redemption level. A points based reward program is often devalued by the credit card issuer and more points are needed for the same item, but cash back rewards typically remain constant.

If you always pay off the balance at the end of the month there is no need to worry about the interest rate, but people that do carry an occasional balance should consider the APR listed in the credit card agreement. Even a small difference in interest charges could end up costing you more in the long run despite earning better rewards.

Saving Money

For people that can manage credit well, the best rewards credit cards are a great way to save money on your purchases. Make sure you ask yourself if you would have made the same purchase if you were paying in cash. This approach will ensure you don’t spend more just to earn rewards as well as reduce the cost of your spending.