How To Pick the Right Rewards Card for You
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Written by
Laura Bogart
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Edited by
Amen Oyiboke-Osifo
Most likely, you think of using your credit card responsibly as a smart way to build credit. The other perks that come to mind often involve airfare or other travel expenses, and you’re too much of a homebody to think the benefits are worthwhile. So, when you pick your next card, you’re not concerned about the credit card rewards. But you should be.
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There are a wide variety of credit card rewards that will suit your interests — so many, in fact, that finding the right one for you could be overwhelming. Fortunately, there are some easy ways to figure out the best reward card for your lifestyle.
Understand the Kinds of Rewards
If the concept of credit card rewards still feels like an amorphous category, let’s break it down in a nutshell — or, rather, let CNBC do it: “Credit card rewards generally come in the form of cash back, miles you can use toward travel or brand-specific points.”
Cash back is pretty much what it sounds like. With cash back cards, you’ll generally earn a percentage of cash when you spend. It’s well suited for people who like to keep things simple and flexible — if the thought of tracking points is overwhelming, or you’d rather have cash to spend or transfer to your bank account, a card with a strong cash back feature might be best for you.
Travel rewards cards are also fairly self-explanatory. They’re perfect for globetrotters — or people who like to travel closer to home — who want perks on their flights, hotels or other aspects of travel. They can also offer other benefits, such as no foreign transaction fees, as well as trip cancellation and baggage delay protections.
Many credit card issuers have their own rewards programs that you should investigate as well. According to Experian, these programs can also provide you with ample options for redeeming your rewards.
“These programs often offer more flexibility in how you can redeem your rewards. You might be able to choose cash back options, book travel or transfer your rewards to partner hotel and airline loyalty programs,” said writer Louis DeNicola.
Eager to get in on the action, some retailers, brands, hotel chains and airlines are partnering with credit card issuers to co-brand credit cards. Closed-loop cards only let you shop at the specific merchant, while open-loop cards let you spend across other vendors — though you still earn rewards for brand purchases.
Understand Your Spending Habits
To figure out which perks will truly serve you well in your daily life, you need to understand where you spend the most money. Do you drive a lot for work, or do you have friends or family one town over? A card that offers high cash back rates for gas or hotel stays might be just what you need.
When you track your spending each month, do you find that you’re a fan of dining out? Or do you prefer to cook at home and have the grocery bills to prove it? Cards that offer restaurant rewards or cash back for groceries would be your best bets.
And if you’re a hardcore Amazon shopper or a Walmart superfan, then you’ll want a card that offers bonus points for these stores — or anywhere you enjoy shopping until you drop.
You could also consider getting a flat-rate cash back card if your spending tracks across a variety of categories.
But you won’t know what truly works for you until you’re honest with yourself about your spending habits. You may love the idea of a card with major travel perks, but if you’re not realistically going to use it, it’s an unrequited love that could leave real money on the table.
Boost Your Credit Score as Much as You Can
Finding the right rewards card has some aspects in common with any search for a great credit card: You have to be approved. The higher your score, the easier it is — and the better your odds of getting the best perks available.
Do everything you’d normally do before applying for a card. Go through your credit report carefully and make sure there’s no fraud or identity theft. If you need to, work out a plan to get current on your payments. It’s better to wait until you’re confident before applying for the rewards package that most inspires you.
Bottom Line
No two rewards cards are created equal, so there’s truly something for everyone, including you. Understanding which kinds of rewards are out there and how they can fit into your life and spending is key.
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