I never really paid much attention to credit card rewards, but then I don’t currently have a credit card. The whole world of credit cards seemed confusing as hell, and quite frankly never seemed worth the time or effort. Just pay in cash, the thought has been for much of the last decade. That may still be the case personally, but a good rewards credit card is a tool to have in your wallet.
What is a rewards credit card?
A credit card that gives you rewards for charging transactions to it in some way.
Do the precious metals or stones mentioned on the card mean anything?
Only to your ego, maybe. I’d care much more about what the card does for me than its color. Sure, pay attention to the gold, platinum, sapphire, ruby, and emerald levels if you want, but remember the grass isn’t necessarily greener on a higher level.
Don’t these cards take hours to research and ensure you’re getting the right ones?
Sure they can. Anything can take hours if you want to evaluate the pros and cons of dozens of offerings. Identify the top 2-3 that are suitable for your interests, then don’t worry about the rest.
What are some common rewards to look for?
Potentially speaking, rewards offered might be
- Free hotel upgrades
- Priority boarding
- Free Global Entry (a savings of $100 application fee)
- Free TSA PreCheck (by itself, an $85 savings)
- Access to certain airport lounges
- Free checked baggage
- Concierge services (event booking, finding restaurants, etc.)
- Rental car insurance
- Travel protection and assistance
- Travel insurance
- Lower or (preferably) zero foreign transaction fees.
What sort of credit do I need?
Good, very good, or excellent credit. The minimum credit score will depend on each card, of course. Go check your current credit for free at the official site, https://www.annualcreditreport.com, or learn more about Credit Karma or Credit Sesame’s services to see your three-digit score. People with rewards credit cards tend not to carry a balance from month-to-month, partially because the APR’s can be higher. Aim to pay off your balance every month.
Are reward credit cards only available to Americans?
No – here’s one rewards credit card that’s available to Canadians. Others may be available to Europeans, but these are a bit rarer to find. Do your own research.
What types of credit cards are out there?
While many credit cards will offer plenty of benefits, some categories do exist:
- Cash-back cards (cards that give you a percentage of your purchases back)
- Miles cards (cards that focus on giving you frequent flyer miles)
- Points cards (cards that give you points for spending on a curated — and sometimes unique — selection of stuff)
It goes without saying that cards may offer more than one category, and that they aren’t always so easy to categorize.
What is a sign-on bonus?
Anything the credit card company might dangle in front of you to get you to choose it over another card. Free flights, lots of frequent flyer points, no annual fee the first year, and so on. Some things are given as soon as you receive the card or make your first transactions, while others are only received if certain conditions are met. Read the fine print, obviously.
What are some common things to watch out for?
In many cases, a ‘minimum spend’ has to be met before you’re eligible for all the fancy rewards. The minimum spend may have to be done at certain locations or spent on certain types of things to be eligible. You’ll want to ensure you can actually reach that minimum spend, and this can be thousands of dollars in the first few months. Wait until you’re sure you’ll be spending enough money before opening the account. You’ll also want to read the fine print as to whether a balance transfer counts towards that minimum spend.
You’ll also want to dig into exactly what the points you’re accumulating can pay for or go towards. Nothing’s more disappointing than earning thousands of points only to realize you can’t use them at the hotel or airline of your choice.
Finally, you’ll want to watch out for limits on how many rewards or miles your spending makes you eligible for, and whether those rewards have any expiration date.
What sort of fees can you expect to pay?
The annual fee is an obvious one, though some credit cards will waive that for the first year. These can be $100/year or more, so you’ll want to ensure you’re getting more benefit out of them than what you’re giving away.
It’s a credit card, so there’s going to be an interest rate, measured in an annual percentage rate (APR). Some credit cards will tout a 0% APR rate for a certain number of months so long as some conditions are met.
You don’t want to get into the late fees or default fees.
What are some common ‘brands’ of cards?
Visa, Mastercard, and American Express are the three most common brand names. It’s really the banks that back them that set the rates and rewards, though — the Visa, Mastercard, and American Express brand will determine how easily that card will be accepted, but it’s Capital One, Chase, Citi, and many other banks actually offering the programs.
What are some final thoughts?
Wherever you go to look for more information, understand their motivations and incentives for presenting cards. The field has a lot of affiliate marketing, which may determine where they’re shown in a listing (or if they’re shown at all).
Also, remember that offers expire — just because you got a great offer when you first signed up for the card doesn’t mean it’s eternal. Pay attention to statements and other announcements sent your way (or those that appear on the online statements / dashboard) to avoid disappointment.
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Also published on Medium.