I love rewards credit cards. Getting paid hundreds of dollars a year to use my credit card to buy things I would buy anyway is, well, rewarding.
With a multitude of rewards cards available and so many categories to choose from (cash back, travel, gas, retail), it’s easy to get lost in the sea of rewards cards. So how do you know which one is best for you?
There isn’t one single rewards card that I can say is perfect for everyone. To find the one best suited for you, take a look at your spending patterns. Do you travel a lot? Are you a college student? Maybe the bulk of your spending is groceries and gas. For each of these situations, there are several cards that could potentially work for you.
Before I discuss how to find the best rewards cards, I should mention that if you carry a balance — no matter how large or small — rewards cards aren’t for you. They typically charge higher-than-average interest rates, so any rewards you might get are negated by fees and interest charges. In this case go with a low-interest card, perhaps from a credit union.
My favorite site for comparing rewards cards is CreditCardTuneUp.com. This site lets you input your average monthly spending in 15 categories such as restaurants, department stores and hotels. To get your monthly spending figures, I recommend looking at your credit card statements from the last 12 months.
Based on the information you provide, you get a list of the cards that best match your spending pattern. It’ll tell you what your first year rewards total would be, minus any annual fee.
Another great resource is NerdWallet.com. The idea is the same, but this site also lets you input your credit score and preferred network (Visa, Mastercard, etc.) You have a choice of either a customized list of your best matches or their list of the best credit cards for 2012. On this list they divide cards by category (rewards, no interest, college, etc.) and tell you why they love the card.
More credit card companies are offering a cash or gift card bonus to entice new members. I’ve seen offers worth as much as $625, but more typical offers range from $100-$200. These signup bonuses are definitely worth a look as you search for your best card.
There are other things to consider as well. If you frequently travel outside the country, look for cards with no foreign transaction fee such as Capital One and some Discover cards. If you fly a lot, be aware of blackout dates and mileage redemption rates. If the card has an annual fee, make sure you’ll spend at least enough to offset the fee.
The key to finding the best rewards card is to look at your spending patterns. Then, use one or both of these websites to compare offers and methodically find the best card for you.
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