Dear Credit Card Adviser,
I have a credit score of 760 and need to decide whether I should get a rewards card or a zero percent interest card. How do I determine the best card for me?
— Jo Ann
Dear Jo Ann,
It all depends on what you want the credit card for.
No-interest cards let you bypass the annual percentage rate, or APR, on purchases or balance transfers for an introductory time period, typically between 12 to 18 months. So, if you need to make a big purchase you can’t pay off in full or you’re carrying a balance on a credit card that features a high APR, this card type would be the better option.
On the other hand, if you’re in the habit of paying your balances off in full each month — which is a very good habit to have — you might as well earn points, miles or cash back on the purchases via a good rewards credit card.
Now, which type of rewards card you should get hinges on your lifestyle and spending habits. For instance, if you dine out a lot, you should consider a card that offers high earning potential (think 2 percent to 5 percent back) at restaurants. If you drive a lot, you should consider a gas credit card.
Or, if you frequently fly the friendly skies, you might want to consider a co-branded airline rewards card. These products typically offer high earnings on travel purchases and certain perks, like priority boarding or waived baggage fees, at that particular carrier.
However, you should get a rewards card only if you plan to pay off your balances in full each month. These products tend to feature higher interest rate ranges. So, while your good credit score should qualify you for an APR on the lower end of the spectrum, any points or miles you earn could still easily be rendered moot once you carry a balance.
The calculator below can help you figure out whether you are actually paying for your credit card’s cash-back rewards in interest.
Calculator: Are you paying for your cash-back rewards?
Find out if you are actually paying for your credit card's cash-back rewards in interest. Using last month's bill, fill in the information below.
|Did you carry a balance from last month? If so, how much?||$|
|How much did you charge this month?||$|
|* Spending category||$|
Keep in mind, some rewards cards carry an annual fee that may or may not be worthwhile, depending on your spending habits.
The good news is, thanks to your solid credit score, you’ll have a lot of options at your disposal.
Just be sure you’ve settled on a card before you go ahead and apply. Each credit card application generates a hard inquiry on your credit report, which could cause your credit score a few points.
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