Navigating Credit Card Rewards

“I believe it’s best to pay in cash” – Eric Church. That being said I feel most people believe it’s best to pay with some form of credit card to earn rewards. I know we have all heard the commercials for double points, triple points, airline miles, black out dates, etc., etc. There are so many different types of credit cards out there on the market that it is almost impossible to figure out which one to use. I get asked all of the time what reward cards my clients should use. I usually respond with find one that rewards you with something you find of value. Here are some of the basics to consider when choosing your credit card.

Cash Back – This type of card earns you cash back based on the purchases you are making. Generally you will earn about 1% on all of your purchases. If you spend $100,000 in a year you will earn about $1000 cash back. Some will earn higher than the 1% on specific categories in specific months. Maybe this month you can earn 3% on gas and 2% on grocery stores. Cash back cards are good for people that pay off the balance each month.

Airline/Travel – Airline credit cards are usually specific to a particular airline and are co-branded with a specific hotel chain or cruise line. Every dollar you spend turns into some form of travel points or dollar value to be used within that specific chain of airline/travel. These are great for people that travel frequently. Usually the credit card will earn you double or triple points for purchasing travel through their brand and a lower percentage on everything else.  They will also offer benefits like VIP lounges, free drinks, and/or first class upgrades.

Balance Transfer – These credit cards are great for people trying to pay down their debt. They usually offer a zero percent or low percentage rate for a specified period of time and either no fee or low fee to transfer the balance to their card. For example, let’s say you owe $10,000 on your credit card and the APR is 15%, you would transfer to the new card at 0% for 18 months, which allows you to pay down the card without getting crushed by fees.

Low Interest – These cards either offer a low introductory APR or a low APR all the time for the user. These usually do not offer any rewards, but if you are a person that typically caries a balance it benefits you to have a card with a much lower rate. This type of card is also beneficial if you know you need to make a large purchase and need several months to pay it off.

Student – A student card usually offers a very low line of credit at a higher APR. This allows students to establish their credit at an early age without the fear of going into severe debt. The limit might be somewhere between $300-$500. I always recommend that a student gets their first card in college, so by the time they are out they can have some established credit. Parents can also set them up for auto pay to make sure the minimum is always paid.

Always do your research on the credit card you are going to use, because most people stick with their primary card for a very long time. There are unlimited resources online to help you choose. Always keep APR, terms, and annual fee in mind when choosing. I am very annual fee opposed and think you should not be charged a fee to use a specific companies card, but that is my opinion. I think your focus should be more geared toward the rewards they are offering.

Please leave a comment or contact me with questions.


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