5 characteristics to consider when choosing a rewards card

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The best credit cards have a lot to offer. On the one hand, it’s good for consumers because more perks make rewards cards more valuable. On the other hand, it also means that choosing a card is more complicated. There are so many features to sort through, and you might be wondering which ones really matter.

You probably don’t want to spend all day comparing every detail of one map with another. To simplify the process, you just need to know which features are the most important.

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1. Reward rate

A card’s reward rate is the amount it earns on purchases. Some rewards cards offer the same flat rate, such as 1.5% or 2%, on each purchase. The type of purchase does not matter with a lump sum rewards card. Other cards offer higher rates in bonus categories and a lower flat rate on all non-bonus expenses. For example, a card might offer 4% on gasoline, 3% on groceries, and 1% on everything else.

The key is to find a card with a reward rate that’s right for you. If you have a few large monthly expenses, look for a card with matching bonus categories. If you think a flat rate card is best for your budget, choose a card that will earn you a competitive amount on every purchase.

2. Redemption possibilities

The redemption options allow you to use the rewards on your card. With cash back credit cards, it’s pretty simple – you earn cash rewards on your purchases, which you can redeem as a credit on your credit card statement. Depending on the card, you can also use cash back as a deposit to a bank account or request a personal check.

Other types of rewards cards, and in particular travel credit cards, offer more complicated ways to redeem rewards. For example, a travel card can allow you to use your points to book flights through a frequent flyer program.

Take a look at how redemptions work for any reward cards you like. The card you choose should have rewards that you are sure you can use.

3. Registration bonus

A sign-up bonus is an offer for new cardholders to earn additional rewards. The most common type of signup bonus is a fixed amount that you receive after spending enough money with your new card, for example 25,000 points for spending $ 1,000 in three months. There are also signup bonuses that offer a higher reward rate for a limited time. An example of this would be a card that offers 5% cashback at gas stations and pharmacies, but only for the first six months.

You can get considerable value from the best sign-up bonuses, so it is a good idea to compare the bonuses offered by different rewards cards.

4. Fees

Everything else on this list is a benefit, but the fees determine how much your rewards card costs you. The first tax to consider is the annual tax. Reward cards with annual fees tend to have more benefits. When you compare credit cards, you will need to weigh the value of each card after factoring in its benefits and annual fees. If you don’t want to pay anything for your credit card, there are plenty of no-annual fee cards available.

International travelers should also be aware of whether the cards have an overseas transaction fee. This will make every trip outside of the United States more expensive. If you’re not traveling overseas, overseas transaction fees aren’t much of an issue (although it’s possible to incur overseas transaction fees when shopping from home) .

Not all costs are important. Most credit cards charge some avoidable fees, with balance transfer fees and cash advance fees being two common examples. If you don’t expect to make balance transfers or cash advances, those fees shouldn’t influence which card you choose.

5. Spend credits

If you’re open to more expensive reward cards, you’ll see some that offer spending credits. An expense credit means that your card issuer covers you for a certain type of purchase up to a certain amount. Suppose you find a card with an annual travel credit of $ 250. This means that you will receive a credit on your first $ 250 per year in travel purchases.

Spending credits can help balance a card’s annual fee. If the above card had an annual fee of $ 400, after subtracting the $ 250 travel credit, it would actually cost you $ 150 per year. This is only the case if you are sure that you can use the expense credit.

It can often feel like rewards cards have an almost endless list of features. When looking for a card, start by focusing on the features listed above. They will help you narrow down your list and find the credit cards that are best for you.

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