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The Points Guy: How to pick a rewards card

Credit Cards » The Points Guy: How To Pick A Rewards Card

Credit card companies offer a dizzying array of rewards cards. They come with numerous sign-on bonuses, fees, perks and partners -- so many that the choices have befuddled even the savviest of shoppers. So how do you pick?

Let "The Points Guy" help you.

In his first interview with Bankrate.com, Brian Kelly, founder of the popular website ThePointsGuy.com, demystifies how to choose a rewards credit card. Kelly explains how the right card can get you a lot more for your money.

What kind of rewards do credit cards offer?

Rewards cards come in three main categories. The first are cash-back and fixed-value cards. They have a very specific, easy-to-understand benefit. They'll give you one point, or maybe a little more than that, for every dollar you spend. You can then convert those points to cash or discounts at a penny per point. Spend $1,000, for example, and you'll get 1,000 points, which converts to a value of $10. The negative side is it can take a lot of points to get a free flight, hotel room, rental car or other redemption.

The Points Guy

The second type is the cobranded credit card, and they align with hotel companies and airlines. The benefit here is that you earn points for their loyalty programs, and some of those are extremely lucrative. You can get a lot more than 1 cent per point with these cards. A lot of them come with perks such as elite status, free checked bags and priority boarding, so they can make sense for travelers. The downside is that when you redeem those points through loyalty programs, you usually have to work around award availability. Some programs don't allow you to just book any flight. And some airlines have made flights during peak times extremely expensive to buy with rewards points.

The third type is the card with a transferrable points program. These give you the best of both worlds. You can redeem points for any flight, and you can also transfer points to a number of airline and hotel loyalty programs. Most of these programs also allow you to redeem points for cash. There are some drawbacks with these cards, however. Most of them charge annual fees, so you need to make sure the amount of points you're getting outweighs the annual fee. With so many different options, it can get confusing, and a lot of people don't get as much value out of these cards as they could.

Which one is right for me? And how do I pick?

I think the first step is identifying what you want out of your credit card. Do you just want cash back? Or do you want the ability to travel around the world in first or business class? Or do you want free hotel stays? You should pick your card depending on what you want.

And be strategic. If you already have elite status with an airline, you may not get as much value out of the airline credit card because you're already getting a lot of those perks.

The great thing about credit cards is that you don't have to choose just one. If you get a couple of different credit cards, you can leverage each one for their strengths. I travel around the world and eat out almost every night. So I like the Chase Sapphire Preferred card because it earns two points per dollar on all travel and dining. Plus, there are no foreign transaction fees.

However, when I stay at Starwood Hotels in the U.S., I use the Starwood Preferred Guest credit card. It rewards me with two points for every dollar I spend at Starwood hotels, and it gives me nights toward elite status that can get me other perks like room upgrades. But the Starwood card has foreign transaction fees, so I never use it abroad.

There are some credit cards that I don't even use to make purchases. For example, I carry the American Express Platinum card because it gets me into American Airlines, Delta (and) US Airways lounges, and it's only $450 a year. That seems like a lot, but the card comes with $200 a year in airline credits to use for food and baggage. So really, I only pay $250 a year for that card, and I'm getting that lounge access. Plus, it gets me faster trips through customs with Global Entry, a $100 value, and a number of other perks like instant Starwood Gold status.

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