What is the best rewards credit card for me?
The best rewards cards aren’t one-size-fits-all. With the proper consideration, you can score a card that will help you achieve your financial goals and earn some cool rewards in the process.
Step 1: Analyze your spending.
Since these cards work based upon where and how you spend your money, the first thing that you should do is review your spending habits. Travel, dining, and gas are three super common earning categories, so focus on those first.
Great budgets make this part really easy. Just remember that it’s important to get a roundabout average of your monthly expenses in common categories so you can evaluate which card will benefit you the most.
Step 2: Choose your rewards type.
Once you have a good idea how you’re going to earn points and miles, it’s time to consider how you want to spend them. Rewards generally come in two main flavors: travel and cash back. With travel, we’re talking about anything from points that can be redeemed for a wide range of options around the world to miles that can only be redeemed for airfare at a handful of airlines.
Cash back options are also pretty varied. Some cards, earn cash back and gift cards that you can spend at certain online retailers. There are even cards for those who want the best of both worlds.
When you’ve decided what type of rewards you prefer, work backward and focus your research on cards that align with your spending habits. Then all that’s left is to start earning points and miles!
The golden rule: Don’t carry a monthly balance on your credit card.
If you can commit to paying your balance off in full every month, the only two things you have to worry about are the signup bonus and redemption options. Take standard APR, for example. If you don’t carry a monthly balance on your card, what does it matter that your APR is 18%?
Redeeming points is just as important as earning them.
One of the key benefits of a great rewards card is being able to redeem points the way you want to. Your points don’t do you any good if you can’t use them. This applies across the board for different types of cards. Some airline cards and hotel credit cards are able to offer you a higher earning potential for purchases with their brand.
How to save more money by maximizing points and miles
There isn’t a one-size-fits-all card that delivers superior points or miles on every conceivable spending category and has the most flexible point redemption options.
Experts recommend that you should keep your credit utilization ratio under 30%. Otherwise, it’s difficult to maintain an above-average credit score.
Owning two or three cards is the right number to get the most points or miles and still keep the cards active (assuming you’re paying off the balances). You’ll be able to take advantage of the bonuses and ongoing rewards without major limitations.