credit cards

What type of rewards card is best?

Only responsible credit card users should mess with rewards credit cards. These cards typically have higher interest rates than nonrewards cards, so they make sense only if you can pay your balances off each month. Otherwise, those interest payments will negate the rewards. Defaulting will also zap your earnings, so you have to keep your account in good standing.

If you can do that, you can choose from a wide variety of rewards cards. "There is a rewards card for any interest you may have," says Bill Hardekopf, CEO of LowCards.com. He says the more popular categories include airline and cash-back cards, but consumers can find rewards cards for just about any hobby or pursuit, including travel, auto purchases, investments, home improvement, bookstore purchases and NASCAR merchandise.

Different Web sites will categorize rewards cards in different ways, but most cards offer benefits in the form of cash-back or rebates, in points toward goods or services, or some combination of the two.

Asked which type packs more financial punch, Hardekopf says shoppers who have a specific interest may do well with a points rewards card, but that cash can go toward anything.

Before applying for a rewards card, check your FICO scores. Use our free estimator, or purchase your actual scores at myFICO.com.

You need to have good FICO scores in the 700 range -- ideally more than 720 -- says Curtis Arnold, founder of CardRatings.com. "If your credit is in the 650 range, work on it," he says. With scores close to 650, you may get approved by issuers offering a range of rates, but applying isn't worth the risk of dinging your credit scores for nothing.

Also examine your typical credit card spending. For instance, if you only charge $500 a month on average, then you might not ever qualify for the highest percent cash back, on a card with tiered rates. It might make more sense for you to choose a card offering one rate, such as 1 percent or 2 percent.

Once you have an idea of your spending habits, FICO score and card preference, you can start comparing cards on sites such as Bankrate, LowCards and CardRatings.

Learn how to compare rewards programs by reading "7 ways to spot unrewarding rewards cards" and by using the spreadsheet to compare features.

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Product Rate Change Last week
Balance Transfer Cards 15.77% --0.00 15.77%
Cash Back Cards 16.48% --0.00 16.48%
Low Interest Cards 10.96% --0.00 10.96%
 
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