One of the coolest phenomena in recent years has been the advent of reward credit cards. Way back in the early days of these programs, those reward credit cards only ever gave you “miles” that could be used for a particular airline. Those cards were designed, largely, for business people, and a way to get businesses to provide purchasing cards to their employees. It worked, too, because reward credit cards were so popular with businesses that the credit card companies began to find ways to implement reward credit card benefits for regular consumers.
So, how do you pick between reward credit cards? There are a few things you need to look at before you develop your reward-based credit card spending plan:
- Know what the rewards are really worth. Miles and points are both nebulous. Dollars and cents, on the other hand, have an absolute value. That’s not to say that a rewards credit card that offers you points or miles isn’t the best one for you. In many cases, it is. But you need to be able to boil it all down to real dollars to make that decision.
- Shop around. Look at your existing credit cards and see if there is a rewards program you can jump into. Look at new ones to apply for, but don’t rush out and apply for them all.
- A bird in the hand is worth two in the bush. What you don’t want to do is go out and apply for a ton of reward credit cards, especially if you already have several. It’s going to hurt your credit score in the short term. Stick with ones you have or, if there’s a truly amazing deal, apply for just one or two.
- Figure out your spending patterns. For a rewards credit card to be worth anything at all to you, you need to use it. The problem is that the amount you’re going to pay in interest is always more than what it would be if you paid cash. Don’t use a credit card and then not pay it off. You’ll make a couple of bucks in rewards, but you’ll also pay more than that in interest.