The average American has 2.6 credit cards. That means, they have 2.6 ways to spend money they don’t have, accrue debt via interest, and fall into financial ruin…
That’s what some financial experts would say anyway.
The truth about credit cards though is that, if you use them responsibly, they actually pay you to carry them.
When you think about it that way, the average American actually is carrying 2.6 income streams.
How do credit cards pay users you ask? Through awesome cash back and travel rewards!
There are thousands of credit cards out there that will offer you cash back or other rewards on the things you buy that you can exchange for the stuff you love. If you pay off your card in full each month, you’ll get all of those benefits without paying a dime in interest.
Here’s how to choose a credit card that offers the best rewards!
1. Understand Where Your Credit is At
Unfortunately, rewards credit cards are only for people who have decent credit. As a matter of fact, the best ones are only for people who have excellent credit.
That’s why your first step when asking “how to choose a credit card that offers rewards” should be to figure out what your credit score is.
If you start applying for rewards cards whiteout knowing your score, you run a high chance of rejection. Every time you get rejected, your credit score will go down slightly.
Armed with knowledge of your score though, you’ll be able to apply for cards that are within reasonable range of what you know you qualify for.
To figure out your credit score, consider using free credit checking tools like Mint.
2. Figure Out What Kind of Rewards You Want
Different credit cards offer different kinds of rewards.
Some offer airline points for a specific airline. Some offer travel points you can use on all airlines. Others offer cashback that takes money off your monthly statement.
Understanding what kind of reward is the most valuable to you will help narrow down your choices substantially.
In my opinion, unless you fly with a certain airline religiously, avoid rewards cards that only give you points on a particular airline. Credit cards that offer more flexible points like BMO world elite will give you much more in the way of redemption options.
3. Do You Qualify For a Business Card?
If you think the kind of rewards personal credit cards give consumers are impressive, wait until you see what business cards offer.
Some business cards offer $1000.00 worth of travel rewards just for signing up for them (and meeting certain qualifications).
If you have a business (yes, a freelance business counts) see what your options are as far as business-focused cards go. Doing so could help you accrue rewards a lot faster than you would with a personal credit card.
4. Compare and Contrast Sign Up Bonuses
One of the biggest perks you’ll get from your credit card is a sign-up bonus. Sign up bonuses are a lump sum of rewards some credit card companies give to consumers just for choosing their card.
There is one catch though…
In order to get the sign-up bonus that’s promised, you’ll have to spend a certain amount of money within 3 months of you receiving your card.
This “minimum spend” amount varies based on how big your sign-up bonus is.
So, if a sign up bonus was $100.00, you may only have to spend $300.00 in three months. If the sign-up bonus was a $1000.00 however, you might have to spend $4000.00 in three months to claim it.
Pick the card with the best sign up bonus that you think you can meet the minimum spending requirements for.
5. Assess The Rate in Which You’ll Receive Rewards
After you get your sign up bonus, your credit card will keep giving you rewards with every purchase you make (which makes for a low effort way to earn passive income). The rate at which you’ll get rewards on purchases though varies from card to card.
Some cards may offer you 3% cash back on purchases while others may only offer you 1%.
Obviously, you should pick the card that’s offering you the highest cash back percentage.
6. Watch Out for Annual Fees
Some credit cards offer big sign up bonuses and high cash back/rewards points percentages but charge consumers annual fees.
These fees can be anywhere from $49.00 per year to $600.00 per year.
The higher your annual fee is, the better your card perks may be. Because of that, if you spend a lot each year, your perks will usually outweigh your fees substantially.
If you don’t spend that much though, you may end up losing a ton of money if your annual fee is too high.
You don’t need an annual fee to get decent rewards from your credit card. So, if you’re not sure whether or not a fee is right for you, just start with a card that doesn’t ask for one.
If you’ve assessed potential credit cards per my tips above, all that’s left to do is apply!
Make sure you fill our your card applications completely (and honestly) and wait to hear back.
Sometimes approval is instant. Other times it takes 2-3 weeks to hear back.
Be patient and once you get your credit card, be sure to always pay off your balances in full each month so you never end up paying any money in interest!
Wrapping Up How to Choose a Credit Card with Great Rewards
My tips above should help you to easily answer your how to choose a credit card with great rewards questions.
Take them to heart and enjoy getting paid to use your cards!
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