Getting a Rewards Credit Card: It's a Lifestyle Thing
It’s no wonder rewards credit cards are popular—everyone loves getting free stuff. And when you can acquire perks such as VIP status, cash back, free flights and gratis hotel stays as a result of your normal spending just because you have a credit card emblazoned with the word “rewards,” free stuff is exactly what you are getting. However, though desired by most, rewards credit cards are actually not right for all consumers. In fact, they are really only suitable for people with excellent credit who pay their bills in full each month because those who don’t should be maniacally focused on lowering the cost of their debt. Still, even if you do fit the rewards credit card mold, you cannot simply open one at random and immediately start jet setting and cashing checks. There are various types of rewards credit cards, and the benefits of each can only be maximized by certain types of people. Therefore, before opening one, turn a critical eye to your lifestyle and make your rewards credit card truly rewarding.
The most important factor to consider when evaluating potential rewards credit cards is whether or not you travel often. If you accumulate at least 30,000 air miles or 20 hotel nights per year, you are a frequent traveler and would be best served getting a travel rewards credit card because it would lower the financial burden of one of your main expenses. However, like the rewards credit card genre itself, there are various options within the travel rewards segment.
The primary determination you must make in narrowing down the choices is if the majority of your travel is through the same airline or hotel chain. If it is, then you should get an airline or hotel credit card as long as you remember to redeem often because credit card companies can change the number of miles and points needed to garner rewards at will, thereby devaluing any already-earned amounts. Frequent redemption eases the pain of devaluation because it both lowers the number of miles or points at risk at any given time and allows you to benefit from your card’s perks before potential devaluation occurs.
If your travel requires logistical variety, however, get a generic travel rewards credit card. The Capital One? Venture Rewards Credit Card is one of the most popular such cards because it allows users to earn miles on all of their spending which can then be redeemed for any purchase made through a travel agency or travel-related website. Essentially, it’s a travel-oriented cash back credit card.
Speaking of which, if you don’t meet the aforementioned travel criteria, you can simply open a cash back credit card. Cash rewards provide straightforward benefit without the inherent hoops and hurdles of travel rewards credit cards. Cash cannot be devalued, it can be used anywhere, and you can redeem it either as statement credit or as a check. Many cash back credit cards also offer extra rewards on certain spending categories, such as gas and groceries. Two of the most popular cash back credit cards are the Chase Freedom? credit card and the Bank of America? Accelerated Cash Credit Card.
Whether either of these credit cards is right for you is ultimately a function of your lifestyle. Indeed, whether any rewards credit card suits you depends on how you spend your money, where you spend it and if you have the financial stability to pay down your debt in a timely fashion. You cannot simply decide that you want rewards, open any rewards credit card and benefit. Self-evaluation must first occur in order to determine what type of rewards credit card, if any, is right for you. So temper your initial rewards enthusiasm, make a logical choice and maximize your credit card’s potential.
Odysseas Papadimitriou is the Founder of CardHub.com, a website that helps consumers find the best credit card deals and operates the nation’s largest gift card exchange.
