Picking the right rewards credit card
Written by Barry Choi

Tuesday, March 29th, 2016

Rewards credit cards are becoming increasingly popular. By simply charging our purchases we can earn money back, travel, or store credit rewards — sounds great, doesn't it?

Picking the right rewards credit card is where it becomes tricky. There's no single best card, and there are other considerations besides loyalty points that you'll want to factor in before signing up for a new card.

What type of rewards do you prefer?

Admittedly the type of rewards we can earn tends to be the most appealing thing about credit cards these days.

Generally speaking, rewards fall into the three categories:

Money back – Also known as cash back, this type of reward is pretty straightforward since it means getting a set % back for every dollar spent.

Travel – Earning airline and hotel points is very popular, but having the flexibility to claim any travel reward is also an option depending on the card you choose.

Store credit – It's not just retail merchants that offer points. You can also earn rewards towards gas, movies, and groceries.

Once you've decided what kind of rewards you'd like to earn, you'll want to research the available cards in order to select the one that best suits your spending habits. Remember, rewards aren't worth it if you're paying interest, so it's important to pay your bills in full and on time every month.

What are the additional benefits?

Rewards aside, it's worth looking at what additional benefits are offered, since they may be of value. Keep in mind that policies on benefits differ, so always read the fine print to find out exactly what's covered.

Insurance – Some cards offer additional insurance such as travel medical, delayed/lost baggage, trip cancellation & interruption, and auto rental collision insurance at no extra charge. Be sure not to confuse this with optional balance protection insurance that many credit card providers offer.

Purchase assurance & extended warranty – There's no need to purchase an in-store extended warranty policy when many credit cards offer it as a standard benefit. What this means is that the warranty/repair service may be extended when you make the purchase on your credit card. Purchase assurance—also known as purchase protection—may cover loss, theft, damage, and even give you a refund if the price drops on your purchases up to a certain period of time.

Other things to consider

Rewards and benefits are certainly appealing, but there are a few common things to look into before settling on a card.

Interest rate  If you carry a balance on your credit cards or are looking to reduce debt, then the interest rate will be important for you. Some credit cards offer a 0% balance transfer but only for a fixed time. Those few months might be more valuable than any potential rewards.

Annual fee – Credit cards offering generous signup bonuses usually have a yearly fee associated with them. The first year's fee will sometimes be waived, so do the math to see if the card is beneficial in the long run. In many circumstances sticking to a no-fee card is simply less hassle.

Redeeming rewards – You'd think that claiming rewards would be a straightforward process, but it can be incredibly difficult. There could be travel blackout dates and fees, rewards caps, or you may only receive cash back once you reach a certain threshold. Some points may even expire after a set amount of time, so choosing a program where it's easy to make a claim is important.

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