When choosing the rewards credit card for you, it pays to do some research and reflection. In general, you should ask yourself:
What types of purchases do you spend the most on?
Whether it’s groceries, travel, dining out or something else, it’s important to select a card that fits with your highest spending categories. If your budget isn’t focused on one specific category, consider applying for a flat-rate card that rewards all eligible purchases. If your budget leans toward certain expenses, a card with higher rewards rates in those categories can help maximize your rewards potential.
You may also want to consider a card with perks that complement those major expenses. Even if the rewards rate is slightly lower than competitors’ rates, extra features sometimes provide more value than the potential rewards you’d earn. For example, several travel cards more than justify their annual fee with features worth hundreds of dollars, such as yearly airfare credits, complimentary airport lounge access and expedited airport security reimbursements.
What kind of rewards are you interested in?
Deciding between a cash back, point or mile-earning card ultimately comes down to personal preference. If you’d rather earn straightforward rewards on everyday purchases, a cash back credit card would be a good fit. If you’re a frequent flyer and want to enhance your travel experience with rewards and perks toward airfare and hotel stays, a travel card that earns points or miles may be better.
While bonus points are often worth more toward travel — meaning you may need to redeem through the issuer’s portal or transfer travel partners to maximize your rewards’ value — some point programs also provide 1:1 value toward cash back in case you’re not a devout traveler.
How much effort are you willing to put into maximizing your earnings?
Many cash back rewards cards are relatively low-effort, as they generally earn rewards on everyday purchases without requiring extra effort to maximize your redemption value. In fact, some issuers even allow you to automatically redeem cash back for an easier experience.
But if you don’t mind putting in a bit of effort, a travel-centric rewards card lets you strategically redeem your points or miles for potentially more value. This may mean booking through an issuer’s travel portal or transferring rewards to a higher-value travel partner. While this effort can pay off, you may not find it worth the headache and sometimes higher annual fee.
What fees are associated with the card?
You’ll need to decide whether a card’s rewards and perks outweigh the cost of its fees. There’s no single right answer, though — it all depends on your personal circumstances and goals. For example, a card that charges a modest annual fee but no foreign transaction fees may be a better deal for international travelers than a no-annual-fee card that charges a 3 percent foreign transaction fee.
However, the most important factor is whether the card’s benefits and potential rewards will justify the annual fee. For instance, a cash back grocery card’s annual fee may not be worthwhile if you typically shop at wholesale clubs or superstores like Walmart. Similarly, luxury travel cards may be hard to justify if you won’t use hundreds of dollars’ worth of perks like elite hotel status upgrades or airport lounge access every year.
Which rewards program best fits your spending and offers maximum value?
Just as important as deciding how much effort you’ll put into redeeming your rewards, figuring out which rewards programs suit your spending habits can determine whether a cash back, points or miles program is best for you.
- Cash back is better if you prefer earning consistent, easy-to-redeem rewards on everyday purchases like food, gas and online shopping.
- Mile-based reward programs are best if you want to travel and spend a lot on related expenses like flights, hotels, transit and dining.
- Point-based reward programs usually offer more flexible redemption choices if you may want to redeem for options other than travel (including for cash back, merchandise and more).
Which welcome offer is more helpful?
Although welcome offers aren’t a substitute for long-term value, they can swing your decision if you’re torn between similar cards or you’re trying to pay off your current card’s balance. The card with the highest-value intro bonus — be it bonus rewards, limited-time reward categories or other intro perks — for the easiest spending requirement can kickstart your savings or get you closer to your dream vacation.
If settling your snowballing interest payments would save you more money than a hefty rewards bonus, a generous 0 percent intro APR might be a more valuable welcome offer. The right rewards credit card’s 0 percent intro APR could provide up to an 18-month break from accumulating interest on your transferred balance. Rewards cards may offer intro APRs on both purchases and balance transfers, but 0 percent intro APRs on purchases typically max out at 15 months.