Choosing the Right Rewards Card for You

Here's a guest post from Miranda Marquit from the Personal Finance Corner on AllBusiness.com.

One of the fears I have conquered is my fear of credit cards. Of course, there is good reason to be wary of credit cards. The high interest rates and fees can be devastating if you carry a balance or get in too deep. But, if you choose carefully and wisely, credit cards can actually be a boon. I am, of course, talking about rewards cards.

When choosing a rewards card, it is important to first consider your priorities. Look at your spending habits, and think about what you normally spend money on. My parents and my husband’s parents live on opposite sides of the country. No matter where we live, we need to fly to visit someone’s family. So for us, it makes sense to have a rewards card that offers miles.

One of my friends likes the idea of getting Christmas for free. She has a rewards card that gives her in-store credit at a well-known toy chain. Every year she uses her rewards card to buy groceries and pay bills. At the end of the year, just in time for Christmas, she has enough to get all of the Christmas presents she gives to her children.

There are credit cards that help you set aside money for college, give you cash back, earn hotel stays and even donate a percentage of your purchases to charity. When choosing your rewards card, it is important to choose a card that works for you, and reflects your particular needs.

There are, however, a few things to keep in mind. After all, these are credit cards we’re dealing with.

• Prepare a budget. Only put something on your credit card if it is in your budget and can be paid off each month.
• Don’t carry a balance. When you carry a balance, the high interest charges can actually erase the value of your rewards (this is especially true of “cash back” cards).
• Read the fine print. Before committing to a rewards card, make sure you understand what qualifies. Some purchases won’t gain you rewards. Also, especially for travel rewards, find out about blackout dates.

When you behave responsibly and create a plan for using your credit cards, you can actually come out ahead, allowing you to save money in the long run.

For more thoughts on credit cards from FMF, see these posts:

• How You Can Earn Over 2.6% Cash Back by Using a Combination of the American Express Blue Cash and Chase Freedom Cash Visa Credit Cards

• The Keys to Getting the Best Reward Credit Card for You

• Making Money by Charging EVERYTHING on the Right Credit Card

Comments

[Philip]

I use my rewards card almost exclusivly now, but have come across the fact that to get the larger percent on categories, the store has to report correctly. Kroger does not come up as a grocery store, and some gas stations list as other expense. All this keeps the return rate down on all that spending. Any ideas on what you can do about those problems?

[FMF]

Philip --

As far as I know, there's nothing you can do if a store reports incorrectly -- other than shop at another store that does report correctly.