What should I look for in credit cards that earn rewards?

credit cards that earn rewardsA number of factors are important when looking for credit cards that earn rewards. Several factors are the same type of features you’d want in any type of card including a good credit card APR, while others are specific to reward credit cards.

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The only way to be sure you’ll reap any rewards from reward credit cards is to read the fine print carefully and pay attention to details. You want to reap benefits from your reward credit cards, not end up losing money with a credit card that only seems like a good deal.

How could I lose money with a reward credit card?

One of the caveats with reward credit cards is that the company needs a way to make up for all the rewards it offers its credit card holders. This can often result in annual fees, according to the California Department of Consumer Affairs (CDCA). Although reward credit cards are not the only credit cards that may come with annual fees, the fees associated with the reward credit cards can be steeper than those imposed on other credit cards since the company does need extra income to pay off rewards.

If you go for a reward credit card just because you want its great credit card rewards even though it has a high annual fee, you may lose money by paying out more in annual fees than you gain from cashing in on the rewards. CDCA also notes that 25% of reward credit cardholders never even bother to redeem the points that earn them rewards, which means the credit card companies can be making an automatic profit by collecting more in fees than they pay out in rewards.

To turn the tables and ensure you do not lose money with a reward credit card, make sure the rewards you reap at least match the credit card annual fee. Also make sure you cash in the points or do whatever you need to do to collect the rewards you’re due.

What are the rewards I’ll get from a rewards credit card?

credit cards that earn rewardsAnother important thing to look at when choosing the best rewards credit card is the type of the rewards offered. Credit card rewards can include everything from discounts on car rentals, hotels or at specific stores or restaurants to frequent flier miles and gift certificates, CDCA notes. They can also include customized rewards that let you choose from available options, according to an article on MSN Money Central. The credit card rewards can also pay you back in cash back for certain purchases.

Is cash back always the best rewards option?

The best option for rewards from a credit card is choosing a reward you will actually use. Don’t go for a rewards credit card that rewards you with frequent flier miles, for instance, if the only traveling you do is in your car. Likewise, you are not likely to reap many benefits if the rewards are for a slate of restaurants or stores where you never eat or shop.

Cash back may seem like a reward that pays off every time, although there are still certain things you need to watch out for. The cash back option often only comes if you spend over a specific amount of money, MSN Money Central says, and sometimes there is a limit on the maximum amount of monetary rewards you can collect regardless of how much you spend.

It’s also imperative to watch your spending to ensure you don’t charge your credit card over your credit limit, which can result in a fee for exceeding your credit. You also want to make sure you can pay back the money in a timely fashion to avoid late fees and excessive money spent on interest rates from carrying credit card debt over an extended amount of time.

Cash back rewards can be particularly beneficial in certain circumstances, with MSN Money Central offering a prime example with one man who was about to remodel his kitchen. Putting the remodeling costs on his reward credit card saved him about $1,000 while spending $10,000 with a 10% back cash reward.

If you know big spending is coming up, cash back may be the most beneficial option, although you still need to make sure the cash back rewards come from money spent at places you will be buying as part of the major expenditure.

Also, be aware of any additional fees that may come with your reward credit card, as well as stipulations that are part of the agreement. You may have a set amount of time to use up rewards before they expire, for instance, or follow other rules to ensure you are reaping the best benefits.

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