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I have to admit, it took me a long time to get into rewards credit cards. For a long time, I thought it was some sort of scam – no way can you get amazing deals, like points towards free travel, or cash back. No such thing as a free lunch, right?
Well… I was wrong. It turns out you can get some really awesome things from rewards credit cards. However, it’s not a free lunch.
How to Properly Use Rewards Credit Cards
The reason rewards credit cards aren’t a free lunch is because they are getting something from you. Or, at least, they would be getting something from you if you don’t properly use your rewards credit card.
Most rewards credit cards have very high interest rates, which means if you don’t pay off your balance monthly, they charge interest on the debt you owe – thereby increasing how much you will have to pay the company. You’ll also notice that some credit cards will offer some reward process maybe through offering air-miles with every transfer you could look into the travel points tool to see if your bank has a credit card on offer for yourself to gain this award.
If you’re savvy and make sure to pay off your credit card bill every month, you get to truly reap the rewards of rewards credit cards – the bonus points (or cash back) plus not having to pay interest on your debt. The reason companies offer these rewards is because they are assuming (or hoping) you won’t responsibly pay back your debt, and they can then collect more money from you – pure profit for them.
Make sure you can pay off your credit card every month before signing up for a rewards credit card. If you can’t, you’re better off sticking with your debit card or a low-interest credit card. If you’re not sure, track your spending for several months and see if you can pay off all your bills without dipping into savings. If you can comfortably do that, then a rewards credit card might be for you.
Why Should I Get a Rewards Credit Card?
As long as you can pay off your credit card every month, you might be interested in signing up for a rewards credit card. Now, if you are old-me, you’re probably asking ‘why should I sign up for a rewards credit card? My debit card/regular credit card works just fine.’
That’s exactly what I said almost 8 months ago! But think about it: if you already use a credit card, why not get rewarded for giving that bank your business? Even if your low-interest rate credit card is with a credit union (like mine is), I still like my rewards point credit card more because I know I will pay it off every month, and why not earn some cash back for doing things I normally do anyway? I don’t make any out of control purchases with my rewards credit card just for the points; it’s all just normal monthly spending.
Need another reason? I personally don’t like using my debit card. I get paranoid when I have to type out my PIN number, and I know that if my credit card is compromised, I’m not liable for the charges right away (as long as I notify the bank, of course). With a debit card, if I don’t notice right away it’s stolen, I could be liable for some charges until I get everything cleared up. I also like the fact I can cancel my credit card, if I need to. I can’t easily cancel my debit card, because right now that’s the account where my paycheck is deposited. It would be a major hassle (and possibly time I’d have to take off work) if that account were compromised.
How to Pick the Right Rewards Credit Card
Choosing the right rewards credit card is totally up to you – do you want to use this card to get points towards free travel and stays in hotels? Would you rather get cash back? As I was dipping my toes into the rewards credit card-sphere, I signed up with Chase’s Freedom rewards credit card, which gives me cash back. It’s been great so far!
There are a host of factors you’ll want to consider before choosing a rewards credit card, beyond the ‘stuff’ you want to get from your card. Would you use your card to purchase groceries more often, or do you plan to use it on travel and dining out? How do you feel about annual fees?
To narrow down your rewards card search, here are some really useful websites that helped me when I was searching for the best card for me:
The Simple Dollar’s Rewards Credit Cards Directory, which lists the 92 best rewards credit cards out there and is updated pretty frequently!
I love searching NerdWallet’s best rewards credit card database. Here you can filter by annual fee, FICO score, etc. The best thing about NerdWallet is that you can look for credit cards not only based on ‘best rewards’, but also the best credit cards for students, or cards with a low interest rate.
Credit Card Tune Up gets even more in depth, asking you how much you spend in certain categories monthly. This is a very comprehensive database, one well worth checking out. Their credit card comparison is stellar, too.
Do you currently use a rewards credit card, and if so, what is the reward you get for that card? If you don’t have a rewards credit card, would you get one or not?