How to Choose the Best Rewards Credit Card for You
Deciding on your first rewards credit card is exciting, but it can also be tricky. All of your friends (and everyone on the internet) have an opinion about what is “the best” rewards credit card—but what is right for others may not necessarily be right for you. Consider these three questions before you jump on applying for your first rewards credit card:
What do you spend your money on?
Credit cards offer different points for different types of spending so to earn the most points for what you already spend on, you need to know where your money is going. For example, one card might offer more points on specialized categories like:
3X on dining
2X travel purchases
3X streaming services
1X on most other purchases
Another rewards card may offer a flat 2X on all purchases. To figure out which card will give you the most rewards, you’ll need to calculate how much you spend on those specialized categories and see if that outweighs earning a lower rate on all other purchases. Take the time to look back at your spending for the past year and do the math on your top options—your work will pay off in more rewards!
Where do you want to redeem your rewards?
There are two types of rewards credit cards: cash back and travel. Cash back cards allow you to redeem the value of your rewards directly on your credit card statement (and sometimes for gift cards, a check, or a deposit to your bank account). You can choose to redeem them regularly, which will give you the most value against inflation and reduce your monthly bill, or you can choose to save them up and redeem them when you make a bigger purchase (including a travel purchase!).
With travel rewards, you earn points or miles that are typically worth the most when redeemed for travel, especially when transferred to a partner airline or hotel. Some credit card companies may also offer a higher redemption value for booking travel through their own travel portal. If you typically travel with one particular airline or are loyal to one hotel company, make sure the card you choose will maximize those benefits with that company.
What perks are important to you?
Travel rewards cards often come with more perks, but also higher annual fees. Some cards include lounge access, reimbursement for TSA pre-check or Global Entry, status with airlines or car rental companies, or free checked bags. They may also include credits for spending on certain types of travel, or on certain memberships and services. You’ll get the most value from these perks if they are things you already spend on anyways. You can still get your money’s worth from the annual fee if you use all of the perks, but if it feels like work to take advantage of them, that may be a sign you’d be better off with another card.
Final Thoughts
Using credit card rewards for a dream purchase or ideal vacation feels amazing, especially if it was easy to earn and redeem points. You’ll get the most out of your rewards card if you are honest with yourself about your spending and energy levels for redeeming your rewards.
Ready to choose your first rewards credit card?
You can find cash back and travel rewards credit cards on our B.F.F. approved credit cards page! Want to talk about optimizing your credit card rewards or paying off debt so you can responsibly start earning rewards, talk to one of our Trainers on Demand or schedule a free 20-minute consultation to be matched with your own financial trainer.