Choosing (and Using) the Most Rewarding Credit Card

In the market for a new credit card with miles, cash or points? It’s a good time to be looking for a rewards card. Post-recession, the marketplace has become ultra-competitive, and as credit card companies fight harder to earn a place in our wallets, they’re offering richer rewards.

For example, BP just launched a new rewards program that offers three different options for consumers to save up to 25 cents per gallon on their fuel purchases. And Capital One just rolled out a new program that offers users of its Quicksilver card 20-percent cash back on all charges for Uber through April 2016.

Sound enticing? Here are a few things to consider before you jump into the rewards arena.

Know whether you qualify

To be approved for a rewards card, you generally need good or excellent credit, with a score around 720 or higher (out of a possible 850). If your score is lower, you may not be approved for a card, or the rewards will be smaller.

Align rewards with your interests

Cards that give you cash back are still the most popular rewards cards, but if you’re trying to do a better job budgeting, you might want to consider a card that offers points toward shopping at your favorite grocery store, or points that will fill your gas tank.

Is traveling more your thing? Then an airline miles reward card might make more sense. The choice is a personal one that revolves around your spending habits.

Assess the offerings

There are lots of credit card comparison sites to choose from. Try one like LowCards.com or CardHub.com. CreditCardForum.com is also useful — you can see what other cardholders have to say about the card(s) you are interested in.

Beware the pitfalls

One common pitfall is earning limits. They may be monthly, quarterly or annually. These earning limits may be assigned to certain spending categories or across the board.

Rotating categories are another thing to look out for. For example, you may be able to earn 5-percent cash back in popular categories, but those categories might change each quarter. Does your spending align with these categories? Furthermore, you may have to ‘opt in’ to earn that rate each quarter.

There’s also the issue of redemption versatility. What can you redeem your rewards for? Do you get a good value on your redemptions? Rewards are only as good as what you get for earning them. And if you’re paying an annual fee (often around $ 100 per year), consider whether the cost of this fee is worth the rewards you’ll earn.

Stay on top of your spending

Accumulating points can be addicting, and you may even justify your spending with the fact that you’re getting something in return. Remember: you’re still spending a lot of money to collect those rewards. Are your purchases justified? Don’t lose your perspective when it comes to collecting rewards.

And by all means, understand that no amount of credit card rewards makes carrying a balance month to month a good deal, particularly since reward cards generally have higher interest rates than standard credit cards.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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